Events at CERGE-EI

Yuval Heller, Ph.D.

University of Oxford, United Kingdom

Authors: Yuval Heller and Erik Mohlin

Abstract: We study environments in which agents are randomly matched to play a Prisoner’s Dilemma, and each player observes a few of the partner’s past actions against previous opponents. We depart from the existing literature in two key respects: (1) we allow a small fraction of the population to be commitment types, and (2) we do not assume a time zero at which the entire community starts to interact. The presence of committed agents destabilizes all previously proposed mechanisms for sustaining cooperation. We present a novel mechanism (involving an essentially unique strategy combination) that sustains stable cooperation in many environments.

JEL Codes: C72, C73, D83

Keywords: Community enforcement; indirect reciprocity; random matching; Prisoner’s Dilemma; image scoring.

Full Text:  “Observations on Cooperation”