Cooperation Between Emotional Players

Lina Andersson ()
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Lina Andersson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden

No 747, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: This paper uses the framework of stochastic games to propose a model of emotions in repeated interactions. An emotional player, who transitions between different states of mind as a response to observed actions taken by the other player, can be in either a friendly, a neutral, or a hostile state of mind. The state of mind determines the player's psychological payoff that together with a material payoff constitutes his utility. In the friendly (hostile) state of mind the player has a positive (negative) concern for the other player's material payoffs. Emotions can both facilitate and obstruct cooperation in the repeated prisoners' dilemma game. If finitely repeated, then a traditional player (who cares only for own material payoffs) can have an incentive to manipulate an emotional player into a friendly state of mind for future gains. If infinitely repeated, then two emotional players may require less patience to sustain cooperation. However, emotions can also obstruct cooperation if the players are either unwilling to punisheach other, or become revengeful when punished.

Keywords: Emotions; cooperation; repeated prisoners dilemma; stochastic games (search for similar items in EconPapers)
JEL-codes: C73 D01 D91 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-12
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth, nep-hpe, nep-mic and nep-ore
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