Voluntarily Separable Prisoner's Dilemma with Reference Letters

Takako Fujiwara-Greve, Masahiro Okuno-Fujiwara () and Nobue Suzuki
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Nobue Suzuki: Department of Economics, Komazawa University

No CIRJE-F-551, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We consider voluntarily separable repeated Prisoner's Dilemma in which a pair of players meet randomly and repeatedly play Prisoner's Dilemma only by mutual agreement. Fujiwara-Greve and Okuno-Fujiwara (2007) consider the case that once a partnership is dissolved there is no information flow to other partnerships. We consider the case that players can issue a reference letter to the partner if they entered cooperation periods, but the content of a letter is not verifiable. We show that the sheer existence of a letter shortens the trust-building periods of new matches and thus improves efficiency in equilibrium.

Pages: 17 pages
Date: 2008-03
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
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