Efficiency May Improve When Defectors Exist

34 Pages Posted: 19 Oct 2013

See all articles by Takako Fujiwara-Greve

Takako Fujiwara-Greve

Keio University - Faculty of Economics

Masahiro Okuno-Fujiwara

University of Tokyo - Faculty of Economics

Nobue Suzuki

Komazawa University

Multiple version iconThere are 2 versions of this paper

Date Written: October 2013

Abstract

Voluntarily Separable Repeated Prisoner's Dilemma (Fujiwara-Greve and Okuno-Fujiwara, 2009) has many kinds of equilibria. Focusing on monomorphic and bimorphic equilibria, we show that a bimorphic equilibrium consisting of cooperators and defectors is most efficient, under a mild payoff condition. This is a striking contrast to ordinary repeated Prisoner's Dilemma, where the symmetric efficient payoff is achieved by the symmetric C-trigger equilibrium. Our result indicates that behavioral diversity can be beneficial for the society, when players are free to escape from personalized punishments.

Keywords: efficiency, diversity, voluntary separation, Prisoner's Dilemma, endogenous partnerships

JEL Classification: C73

Suggested Citation

Fujiwara-Greve, Takako and Okuno-Fujiwara, Masahiro and Suzuki, Nobue, Efficiency May Improve When Defectors Exist (October 2013). Tokyo Center for Economic Research (TCER) Paper No. E-60, Available at SSRN: https://ssrn.com/abstract=2341677 or http://dx.doi.org/10.2139/ssrn.2341677

Takako Fujiwara-Greve (Contact Author)

Keio University - Faculty of Economics ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

Masahiro Okuno-Fujiwara

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

Nobue Suzuki

Komazawa University ( email )

1-23-1 Komazawa
Setagaya-ku
Tokyo, 1548525
Japan

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