The absent-minded prisoner
If one of two rational players is absent-minded for at least three rounds, cooperation in a prisoners dilemma with a finite number of repetitions is possible. If both players are absentminded, even two rounds of absent-mindedness can be enough for cooperation in these rounds and all rounds before. Sufficient conditions for the existence of a cooperative equilibrium are derived, a plausible interpretation of absent-mindedness in the case of many repetitions is given.
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Levine's Working Paper Archive
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