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Errors can increase cooperation in finite populations

Huanren Zhang ()

Games and Economic Behavior, 2018, vol. 107, issue C, 203-219

Abstract: I use an evolutionary game to investigate how the level of noise influences cooperation and efficiency in a dynamic setting. Players choose strategies to play indefinitely repeated prisoner's dilemmas; the strategies are represented by finite automata, and complexity costs are imposed. Players update their strategies based on the successfulness of the strategies. Using both theoretical analysis and computational experiments, I show that the presence of noise dramatically changes the system dynamics. The effect of noise interacts with the benefit of cooperation: noise can increase cooperation, but only when its level is low and the benefit of cooperation is high. In the noise-free environment, I observe constant oscillations between cooperation and defection. In contrast, the presence of noise makes Win-Stay Lose-Shift (WSLS) a successful strategy when the benefit of cooperation is sufficiently high, making cooperation relatively stable and leading to an efficient outcome.

Keywords: Cooperation; Prisoner's dilemma; Evolutionary game theory; Evolutionary dynamics; Uncertainty; Learning; Bounded rationality (search for similar items in EconPapers)
JEL-codes: C63 C72 C73 D80 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:gamebe:v:107:y:2018:i:c:p:203-219