Communication and Cooperation in Prisoner’s Dilemma Games
24 Pages Posted: 7 Jan 2022
Date Written: November 23, 2021
We consider a Prisoner’s Dilemma model with a pre-play communication stage. Players get a disutility from deceiving others after sending a message of conditional cooperation. Each player’s realized lying aversion cost is private information. We prove existence and characterize the (unique) symmetric perfect Bayesian equilibrium that maximizes cooperation. In this distinguished equilibrium, the frequency of cooperation decreases as material gains from lying (or losses from being deceived) increase. We introduce an iterated procedure allowing to characterize the set of rationalizable strategies. We find that cooperation may decrease as a population starts to value honesty more. We extend the model to account for the possibility of a benefit obtained when lying or the effect of the audience size.
Keywords: cooperation, prisoner’s dilemma, lie aversion, perfect Bayesian equilibrium
JEL Classification: C72
Suggested Citation: Suggested Citation