Cooperative Equilibria in Iterated Social Dilemmas
In: Proceedings of the 6th International Symposium on Algorithmic Game Theory, Lecture Notes in Computer Science 8146 (2013) pp. 146-158.
12 Pages Posted: 24 May 2013 Last revised: 31 Mar 2014
Date Written: May 23, 2013
The implausibility of the extreme rationality assumptions of Nash equilibrium has been attested by numerous experimental studies with human players. In particular, the fundamental social dilemmas such as the Traveler's dilemma, the Prisoner's dilemma, and the Public Goods game demonstrate high rates of deviation from the unique Nash equilibrium, dependent on the game parameters or the environment in which the game is played. These results inspired several attempts to develop suitable solution concepts to more accurately explain human behaviour. In this line, the recently proposed notion of cooperative equilibrium, based on the idea that players have a natural attitude to cooperation, has shown promising results for single-shot games. In this paper, we extend this approach to iterated settings. Specifically, we define the Iterated Cooperative Equilibrium (ICE) and show it makes statistically precise predictions of population average behaviour in the aforementioned domains. Importantly, the definition of ICE does not involve any free parameters, and so it is fully predictive.
Keywords: Cooperation, Cooperative Equilibrium, Iterated Prisoner's Dilemma, Iterated Traveler's Dilemma, Iterated Public Goods Game
JEL Classification: C72, H11
Suggested Citation: Suggested Citation