The Emergence of Reciprocally Beneficial Cooperation
ICER Working Paper No. 18/2010
25 Pages Posted: 9 Jul 2010
Date Written: July 8, 2010
Abstract
This paper offers a new and robust model of the emergence and persistence of cooperation. In the model, interactions are anonymous, the population is well-mixed, and the evolutionary process selects strategies according to material payoffs. The cooperation problem is modeled as a game similar to Prisoner’s Dilemma, but there is an outside option of nonparticipation and the payoff to mutual cooperation is stochastic; with positive probability, this payoff exceeds that from cheating against a cooperator. Under mild conditions, mutually beneficial cooperation occurs in equilibrium. This is possible because the non-participation option holds down the equilibrium frequency of cheating.
Keywords: Cooperation, voluntary participation, random payoffs
JEL Classification: C73
Suggested Citation: Suggested Citation
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