SHOULD THE GOVERNMENT REWARD COOPERATION? INSIGHTS FROM AN AGENT-BASED MODEL OF WEALTH REDISTRIBUTION

Frank Schweitzer, Luca Verginer and Giacomo Vaccario
Additional contact information
Frank Schweitzer: Chair of Systems Design, ETH Zurich, Weinbergstrasse 58, 8092 Zurich, Switzerland
Giacomo Vaccario: Chair of Systems Design, ETH Zurich, Weinbergstrasse 58, 8092 Zurich, Switzerland

Advances in Complex Systems (ACS), 2020, vol. 23, issue 07, 1-19

Abstract: In our multi-agent model, agents generate wealth from repeated interactions for which a prisoner’s dilemma payoff matrix is assumed. Their gains are taxed by a government at a rate α. The resulting budget is spent to cover administrative costs and to pay a bonus to cooperative agents, which can be identified correctly only with a probability p. Agents decide at each time step to choose either cooperation or defection based on different information. In the local scenario, they compare their potential gains from both strategies. In the global scenario, they compare the gains of the cooperative and defective subpopulations. We derive analytical expressions for the critical bonus needed to make cooperation as attractive as defection. We show that for the local scenario the government can establish only a medium level of cooperation because the critical bonus increases with the level of cooperation. In the global scenario, instead full cooperation can be achieved once the cold-start problem is solved because the critical bonus decreases with the level of cooperation. This allows to lower the tax rate, while maintaining high cooperation.

Keywords: Game theory; incentives; sustainable cooperation; mechanism design (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219525920500186
Access to full text is restricted to subscribers

Related works:
Working Paper: Should the government reward cooperation? Insights from an agent-based model of wealth redistribution (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:acsxxx:v:23:y:2020:i:07:n:s0219525920500186

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219525920500186

Access Statistics for this article

Advances in Complex Systems (ACS) is currently edited by Frank Schweitzer

More articles in Advances in Complex Systems (ACS) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().