Dynamic group formation in the repeated prisonerʼs dilemma
Toshimasa Maruta and
Games and Economic Behavior, 2012, vol. 74, issue 1, 269-284
We consider dynamic group formation in repeated n-person prisonerʼs dilemma. Agreements in coalitional bargaining are self-binding in that they are supported as subgame perfect equilibria of repeated games. Individuals are allowed to renegotiate the cooperating group agreement through a process of voluntary participation. We prove that a cooperating group forms as an absorbing state of a Markov perfect equilibrium after a finite number of renegotiations if and only if the group is Pareto efficient, provided that individuals are patient. The cooperating group can only expand.
Keywords: Group formation; Prisonerʼs dilemma; Repeated games; Non-cooperative coalitional bargaining; Efficiency; Renegotiation (search for similar items in EconPapers)
JEL-codes: C70 C72 D70 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:74:y:2012:i:1:p:269-284
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