Cooperation in Large Societies, Second Version

26 Pages Posted: 3 Jun 2014

Date Written: June 1, 2014

Abstract

This paper investigates how cooperation can be sustained in large societies even in the presence of agents who never cooperate. In order to do this, we consider a large but finite society where in each period agents are randomly matched in pairs. Nature decides, within each match, which agent needs help in order to avoid some loss, and which agent can help him incurring a cost smaller than the loss. Each agent observes only his own history, and we assume that agents do not recognize each other. We introduce and characterize a class of equilibria, named linear equilibria, in which cooperation takes place. Within this class, efficiency can be achieved with simple one-period strategies, which are close to a tit-for-tat strategy when the society is large, and which generate smooth dynamics of the expected average level of cooperation. Unlike previously suggested equilibria in similar environments, our equilibria are robust to the presence of behavioral agents and other perturbations of the base model. We also apply our model to bilateral trade with many traders, where we find that the mechanism of transmitting defections is transmissive and not contagious as in our base model.

Keywords: Cooperation, Many Agents, Repeated Games, Unilateral Help

JEL Classification: D82, C73, D64

Suggested Citation

Dilme, Francesc, Cooperation in Large Societies, Second Version (June 1, 2014). PIER Working Paper 14-021. Available at SSRN: https://ssrn.com/abstract=2444935 or http://dx.doi.org/10.2139/ssrn.2444935

Francesc Dilme (Contact Author)

University of Bonn ( email )

Lennestrasse 35
53113 Bonn
Germany
0049228737957 (Phone)

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