The Emergence of Reciprocally Beneficial Cooperation

ICER Working Paper No. 18/2010

25 Pages Posted: 9 Jul 2010

See all articles by Sergio Beraldo

Sergio Beraldo

CSEF - University of Naples Federico II

Robert Sugden

University of East Anglia - School of Economics

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

Beraldo, Sergio and Sugden, Robert, The Emergence of Reciprocally Beneficial Cooperation (July 8, 2010). ICER Working Paper No. 18/2010 , Available at SSRN: https://ssrn.com/abstract=1636152 or http://dx.doi.org/10.2139/ssrn.1636152

Sergio Beraldo (Contact Author)

CSEF - University of Naples Federico II ( email )

Caserta

Robert Sugden

University of East Anglia - School of Economics ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom
+44 (0) 1603 593423 (Phone)

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