Communication and Cooperation in Prisoner’s Dilemma Games

24 Pages Posted: 7 Jan 2022

See all articles by Eric Bahel

Eric Bahel

Virginia Tech

Sheryl B. Ball

Virginia Tech - Department of Economics

Sudipta Sarangi

Virginia Tech

Date Written: November 23, 2021

Abstract

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

Bahel, Eric and Ball, Sheryl B. and Sarangi, Sudipta, Communication and Cooperation in Prisoner’s Dilemma Games (November 23, 2021). Available at SSRN: https://ssrn.com/abstract=3969503 or http://dx.doi.org/10.2139/ssrn.3969503

Eric Bahel

Virginia Tech ( email )

Blacksburg, VA 24061
United States

Sheryl B. Ball

Virginia Tech - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States

Sudipta Sarangi (Contact Author)

Virginia Tech ( email )

250 Drillfield Drive
Blacksburg, VA 24061
United States

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