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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2005:1:
Choosing Opponents in Games of Cooperation and Coordination

Peter Engseld and Andreas Bergh ()

Abstract: We analyze a cooperation game and a coordination game in an evolutionary environment. Agents make noisy observations of opponent's propensity to play dove, called reputation, and form preferences over opponents based on their reputation. A game takes place when two agents agree to play. Socially optimal cooperation is evolutionarily stable when reputation perfectly reflects propensity to cooperate. With some reputation noise, there will be at least some cooperation. Individual concern for reputation results in a seemingly altruistic behavior. The degree of cooperation is decreasing in anonymity. If reputation is noisy enough, there is no cooperation in equilibrium. In the coordination game, the efficient equilibrium is chosen and agents with better skills to observe reputation earn more.

Keywords: Cooperation; Coordination; Conditioned Strategies; Prisoners Dilemma; Signaling; Reputation; Altruism; Evolutionary Equilibrium; (follow links to similar papers)

JEL-Codes: C70; C72; (follow links to similar papers)

25 pages, January 4, 2005, Revised November 29, 2005

This paper has been replaced by 2005:45 "Choosing Opponents in Prisoners’ Dilemma: An Evolutionary Analysis"

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