Seemingly Unrelated Repeated Games
Game Theory and Information from EconWPA
Suppose Player A is playing two apparently independent repeated games with two other people, B and C, with A randomly matched, each period, with either B or C. Each dyad maintains the maximum incentive-compatible level of cooperation within the dyad, even if cooperation has broken down in the other dyad. Thus, if A defects against B, say, then C is still willing to cooperate with A to the maximum incentive-compatible degree. Nevertheless, we show that the simple presence of each cooperative relationship can increase the maximum incentive compatible level of cooperation in the other dyad, due to a counterintuitive circular reasoning or “bootstrapping” effect. With more than two relationships, bootstrapping effects alternate with equally counterintuitive reverse bootstrapping effects.
Keywords: Repeated Games; Random Matching (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
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Note: Type of Document - pdf; pages: 28
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0511004
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