Table of Contents

Why We Cooperate

Jillian J. Jordan, Yale University - Department of Psychology
Alexander Peysakhovich, Harvard University - Program for Evolutionary Dynamics
David G. Rand, Yale University

Dynamic Contests with Bankruptcy: The Despair Effect

Luis C. Corchón, Universidad Carlos III de Madrid - Department of Economics
Carmen Bevia, Universitat Autònoma de Barcelona - Departament d’Economia i d’Història Econòmica

How Peer-Punishment Affects Cooperativeness in Homogeneous and Heterogeneous Groups

Marianna Bicskei, University of Goettingen (Gottingen)
Matthias Lankau, University of Goettingen (Gottingen)
Kilian Bizer, University of Goettingen (Gottingen)

Alternating-Offer Bargaining with a Global Games Information Structure

Anton Tsoy, Massachusetts Institute of Technology (MIT)


GAME THEORY & BARGAINING THEORY eJOURNAL

"Why We Cooperate" Free Download
Forthcoming in Jean Decety & Thalia Wheatley (eds.) “The Moral Brain: Multidisciplinary Perspectives? (Cambridge: MIT Press, 2014)

JILLIAN J. JORDAN, Yale University - Department of Psychology
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ALEXANDER PEYSAKHOVICH, Harvard University - Program for Evolutionary Dynamics
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DAVID G. RAND, Yale University
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A key element of human morality is prosocial behavior. Humans are unique among animals in their willingness to pay costs to benefit unrelated friends and strangers. This cooperation is a critical part of our identity as moral beings. Here, we ask why humans cooperate, and what can explain variation in cooperative behavior across social groups, individuals, and situations. We begin by defining cooperation, and discussing economic games as laboratory models for studying cooperative behavior. Next we provide an overview of several mechanisms that can make cooperation advantageous in the long run: direct reciprocity, indirect reciprocity, and institutions. We then turn to cooperative behavior that occurs beyond the reach of such mechanisms and thus is truly costly. We discuss the Social Heuristics Hypothesis, which contends that when individuals learn that cooperative strategies are generally advantageous, they become internalized as intuitive defaults. These defaults can spill over to produce “irrational? cooperative behavior even when externally imposed incentives are absent. Thus, we suggest that daily experience plays an important role in shaping culturally varying conceptions of cooperation as a virtuous behavior. Finally, we close by discussing open questions for future research on cooperation.

"Dynamic Contests with Bankruptcy: The Despair Effect" Free Download

LUIS C. CORCHÓN, Universidad Carlos III de Madrid - Department of Economics
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CARMEN BEVIA, Universitat Autònoma de Barcelona - Departament d’Economia i d’Història Econòmica
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We analyze a two period contest in which agents may become bankrupt at the end of the …first period. A bankrupt agent is excluded from the contest in the second period of the game. We investigate the existence of a subgame perfect equilibrium in pure strategies. We distinguish between a borrowing equilibrum where at least an agent might be bankrupt and a non borrowing equilibrium where no agent is bankrupted. We prove that the former occurs when the agent taking loans is relatively poor. This is the despair effect where severely handicapped agents take actions that are risky. We also show conditions under which both kind of equilibria overlap or not. We provide an example in which no equilibrium exists.

"How Peer-Punishment Affects Cooperativeness in Homogeneous and Heterogeneous Groups" Free Download

MARIANNA BICSKEI, University of Goettingen (Gottingen)
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MATTHIAS LANKAU, University of Goettingen (Gottingen)
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KILIAN BIZER, University of Goettingen (Gottingen)
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This article analyzes how the anticipation of peer-punishment affects cooperativeness in the provision of public goods under social identity. For this purpose we conduct one-shot public good games with induced social identity and implement in-group, out-group and random matching protocols. Our measure of cooperativeness is subjects’ conditional contribution elicited via the strategy method, which allows for observing behavior contingent on every possible level of group members’ cooperation. We demonstrate, firstly, that the social environment is a determinant of how the threat of peer-punishment influences cooperation. The strongest increase is clearly evident when subjects interact with members of different identities, which is especially the case for individuals who were initially categorized as freeriders. Secondly, anticipation of peer-punishment clearly eliminates the typically existing ingroup bias without punishment and renders out-group members to be as cooperative as ingroups members. Lastly, the results indicate that the institutions of peer-punishment and social identity may be complemented in order to raise subjects’ cooperativeness.

"Alternating-Offer Bargaining with a Global Games Information Structure" Free Download

ANTON TSOY, Massachusetts Institute of Technology (MIT)
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This paper studies an infinite-horizon bilateral bargaining model with alternating offers and private correlated values. The correlation of values is given by a global games style information structure: players’ types are positively correlated with the underlying fundamental and values are strictly increasing functions of the types. The paper characterizes frequent-offer limits of common screening equilibria in which both parties make offers to screen the opponent’s type and all types of either party follow the same path of offers. Segmentation equilibria in which types partially separate themselves by the initial offer are also analyzed. These two classes of equilibria have drastically different trade dynamics and efficiency properties. Limits of equilibria as both the time between offers vanishes and the correlation of values becomes nearly perfect are characterized analytically, and equilibrium behavior under infrequent offers is examined by numerical simulations.

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This eJournal distributes working and accepted paper abstracts of empirical and theoretical papers on game theory, defined as the study of the strategic interaction among rational agents in competitive and cooperative environments, and bargaining theory, defined as a situation in which two or more players have a common interest to co-operate, but have conflicting interests over exactly how to co-operate. The topics in this eJournal include all of the subjects in Section C7 of the JEL classification system.

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