On Optimal Social Convention in Voluntary Continuation Prisoner's Dilemma Games

31 Pages Posted: 21 Jan 2014

See all articles by Filip Vesely

Filip Vesely

University of Wisconsin at Milwaukee - Economics

Chun-Lei Yang

Multiple version iconThere are 2 versions of this paper

Date Written: December 31, 2013

Abstract

When the repeated prisoner’s dilemma setup is generalized to allow for a unilateral breakup, maximal efficiency in equilibrium remains an open question. With restrictions of simple symmetry with eternal mutual cooperation, defection, or (matched) alternation on the equilibrium path, we describe the upper limit of discounted lifetime payoff and construct simple social conventions that, for a large set of parameters, achieve it. While all other well-known equilibrium designs in the literature punish defections with a breakup and thus reach the optimum only in degenerate cases, exploited cooperators in ours allow defectors to compensate them by cooperating more in the future.

Keywords: voluntary continuation, repeated prisoner’s dilemma, social convention, moral maxim, finite automation, eternal cooperation, eternal alternation

JEL Classification: C730

Suggested Citation

Vesely, Filip and Yang, Chun-Lei, On Optimal Social Convention in Voluntary Continuation Prisoner's Dilemma Games (December 31, 2013). CESifo Working Paper Series No. 4553, Available at SSRN: https://ssrn.com/abstract=2382457

Filip Vesely (Contact Author)

University of Wisconsin at Milwaukee - Economics ( email )

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