Inducing Cooperation by Self-Stipulated Penalties

Cheng-Zhong Qin
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Cheng-Zhong Qin: Department of Economics, University of California

Annals of Economics and Finance, 2008, vol. 9, issue 2, 385-395

Abstract: This paper considers an approach for inducing cooperation in prisoner¡¯s dilemma. The approach is based on players individually committing to pay self-stipulated penalties for defection. We provide a complete characterization of self-stipulated penalties that are necessary and sufficient to induce the players to cooperate in subgame-perfect equilibrium. An alternative interpretation of the conditions using contract remedies is provided.

Keywords: Penalty for defection; Prisoner¡¯s dilemma; Subgame-perfect equilibrium. (search for similar items in EconPapers)
JEL-codes: C72 K12 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2008:v:9:i:2:p:385-395

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