Voluntarily Separable Repeated Prisoner's Dilemma
Takako Fujiwara-Greve () and
Masahiro Okuno-Fujiwara ()
Review of Economic Studies, 2009, vol. 76, issue 3, 993-1021
Ordinary repeated games do not apply to real societies where one can cheat and escape from partners. We formulate a model of endogenous relationships that a player can unilaterally end and start with a randomly assigned new partner with no information flow. Focusing on two-person, two-action Prisoner's Dilemma, we show that the endogenous duration of partnerships generates a significantly different evolutionary stability structure from ordinary random matching games. Monomorphic equilibria require initial trust building, while a polymorphic equilibrium includes earlier cooperators than any strategy in monomorphic equilibria and is thus more efficient. This is due to the non-linearity of average payoffs. Copyright , Wiley-Blackwell.
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:76:y:2009:i:3:p:993-1021
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