Voluntarily Separable Prisoner's Dilemma with Reference Letters
We consider voluntarily separable repeated Prisoner's Dilemma in which a pair of players meet randomly and repeatedly play Prisoner's Dilemma only by mutual agreement. Fujiwara-Greve and Okuno-Fujiwara (2007) consider the case that once a partnership is dissolved there is no information flow to other partnerships. We consider the case that players can issue a reference letter to the partner if they entered cooperation periods, but the content of a letter is not verifiable. We show that the sheer existence of a letter shortens the trust-building periods of new matches and thus improves efficiency in equilibrium.
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- Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
- Takako Fujiwara-Greve & Masahiro Okuno-Fujiwara, 2008.
"Voluntarily Separable Repeated Prisoner's Dilemma,"
CIRJE-F-599, CIRJE, Faculty of Economics, University of Tokyo.
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