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Simple guilt and cooperation

Ronald Peeters () and Marc Vorsatz ()

No 1801, Working Papers from University of Otago, Department of Economics

Abstract: We introduce simple guilt into a generic prisoner’s dilemma (PD) game and solve for the equilibria of the resulting psychological game. It is shown that for all guilt parameters, it is a pure strategy equilibrium that both players defect. But, if the guilt parameter surpasses a threshold, a mixed strategy equilibrium and a pure strategy equilibrium in which both players cooperate emerge. We implement three payoff constellations of the PD game in a laboratory experiment and find in line with our equilibrium analysis that first- and second-order beliefs are highly correlated and that the probability of cooperation depends positively on these beliefs. Finally, we provide numerical evidence on the degree of guilt cooperators experience

Keywords: Psychological game theory; Guilt; Prisoner’s dilemma (search for similar items in EconPapers)
JEL-codes: C72 C91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-hpe
Date: 2018-01, Revised 2018-01
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http://www.otago.ac.nz/economics/research/discussion/otago672909.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:1801

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