 The optimal degree of cooperation in the repeated Prisoners' Dilemma with side paymentsYuk-fai Fong and Jay Surti () Games and Economic Behavior, 2009, vol. 67, issue 1, 277-291 Abstract: In the infinitely repeated Prisoners' Dilemma with side payments, we characterize the Pareto frontier of the set of subgame perfect equilibrium payoffs for all possible combinations of discount factors. Play paths implementing Pareto dominant equilibrium payoffs are uniquely determined in all but the first period. Full cooperation does not necessarily implement these payoffs even when it maximizes total stage game payoffs. Rather, when the difference in players' discount factors is sufficiently large, Pareto dominant equilibrium payoffs are implemented by partial cooperation supported by repeated payments from the impatient to the patient player. When both players are sufficiently patient, such payoffs, while implemented via full cooperation, are supported by repeated payments from the impatient to the patient player. We characterize conditions under which public randomization has no impact on the Pareto dominant equilibrium payoffs and conditions under which such payoffs are robust to renegotiation. Keywords: Repeated; Prisoners'; Dilemma; Side; payments; Differential; time; preferences; Pareto; dominant; equilibrium; payoffs; Renegotiation-proofness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:67:y:2009:i:1:p:277-291 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
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