Evolutionary Exploration of the Finitely Repeated Prisoners’ Dilemma - The Effect of Out-of-Equilibrium Play

Games, Vol. 4, pp. 1-20, 2013

22 Pages Posted: 10 Jan 2013

See all articles by Kristian Lindgren

Kristian Lindgren

Chalmers University of Technology

Vilhelm Verendel

Chalmers University of Technology

Date Written: January 9, 2013

Abstract

The finitely repeated Prisoners' Dilemma is a good illustration of the discrepancy between the strategic behaviour suggested by a game-theoretic analysis and the behavior often observed among human players, where cooperation is maintained through most of the game. A game-theoretic reasoning based on backward induction eliminates strategies step by step until defection from the first round is the only remaining choice, reflecting the Nash equilibrium of the game. We investigate the Nash equilibrium solution for two different sets of strategies in an evolutionary context, using replicator-mutation dynamics. The first set consists of conditional cooperators, up to a certain round, while the second set in addition to these contains two strategy types that react differently on the first round action: The 'Convincer' strategies insist with two rounds of initial cooperation, trying to establish more cooperative play in the game, while the "Follower" strategies, although being first round defectors, have the capability to respond to an invite in the first round. For both of these strategy sets, iterated elimination of strategies shows that the only Nash equilibria are given by defection from the first round. We show that the evolutionary dynamics of the first set is always characterized by a stable fixed point, corresponding to the Nash equilibrium, if the mutation rate is sufficiently small (but still positive). The second strategy set is numerically investigated, and we find that there are regions of parameter space where fixed points become unstable and the dynamics exhibits cycles of different strategy compositions. The results indicate that, even in the limit of very small mutation rate, the replicator-mutation dynamics does not necessarily bring the system with Convincers and Followers to the fixed point corresponding to the Nash equilibrium of the game. We also perform a detailed analysis of how the evolutionary behavior depends on payoffs, game length, and mutation rate.

Keywords: backward induction, rationality, prisoners' dilemma, evolutionary dynamics

JEL Classification: C7, C72, C73

Suggested Citation

Lindgren, Kristian and Verendel, Vilhelm, Evolutionary Exploration of the Finitely Repeated Prisoners’ Dilemma - The Effect of Out-of-Equilibrium Play (January 9, 2013). Games, Vol. 4, pp. 1-20, 2013, Available at SSRN: https://ssrn.com/abstract=2198270

Kristian Lindgren

Chalmers University of Technology ( email )

Gothenburg
SE-412 96 Goteborg
Sweden

Vilhelm Verendel (Contact Author)

Chalmers University of Technology ( email )

Gothenburg
SE-412 96 Goteborg
Sweden

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