Observations on Cooperation

Review of Economic Studies, Forthcoming

62 Pages Posted: 2 Feb 2015 Last revised: 17 Nov 2017

See all articles by Yuval Heller

Yuval Heller

Bar Ilan University

Erik Mohlin

University of Oxford - Nuffield College of Medicine

Date Written: November 15, 2017

Abstract

We study environments in which agents are randomly matched to play a Prisoner's Dilemma, and each player observes a few of the partner's past actions against previous opponents. We depart from the existing related literature by allowing a small fraction of the population to be commitment types. The presence of committed agents destabilizes previously proposed mechanisms for sustaining cooperation. We present a novel intuitive combination of strategies that sustains cooperation in various environments. Moreover, we show that under an additional assumption of stationarity, this combination of strategies is essentially the unique mechanism to support full cooperation, and it is robust to various perturbations. Finally, we extend the results to a setup in which agents also observe actions played by past opponents against the current partner, and we characterize which observation structure is optimal for sustaining cooperation.

Keywords: Community enforcement; indirect reciprocity; random matching; Prisoner's Dilemma; image scoring

JEL Classification: C72, C73, D83

Suggested Citation

Heller, Yuval and Mohlin, Erik, Observations on Cooperation (November 15, 2017). Review of Economic Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2558570 or http://dx.doi.org/10.2139/ssrn.2558570

Yuval Heller (Contact Author)

Bar Ilan University ( email )

Dept. of Economics, Building 504
Bar Ilan University
Ramat Gan, 5290002
Israel
+972 5252 82182 (Phone)

HOME PAGE: http://https://sites.google.com/site/yuval26/

Erik Mohlin

University of Oxford - Nuffield College of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

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