SSE/EFI Working Paper Series in Economics and Finance
Prisoners' Other Dilemma
() and Matthias Blonski
Abstract: We find that contrary to common perception, cooperation as
equilibrium of the infinitely repeated discounted prisoner's dilemma is in
many relevant cases not very plausible, or at least questionable: for a
significant subset of the payoff-discount factor parameter space
cooperation equilibria are strictly risk dominated by non-cooperation
(according to the Harsanyi-Selten 1988 criterion). Examples include
collusion equilibria in the repeated Cournot duopoly.
Keywords: Prisoner's Dilemma; Risk dominance; Repeated games; Equilibrium selection; Cooperation; Collusion; (follow links to similar papers)
JEL-Codes: C72; (follow links to similar papers)
11 pages, February 20, 2001, Revised August 4, 2001
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