Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 167: Rationality, Transparency, and Evolutionary Selection

Karl Wärneryd ()
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Karl Wärneryd: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden

Abstract: We discuss attempts to justify conditional cooperation in the Prisoners’ Dilemma based on the idea of identifying an opponent’s strategy. We note that the concept of such complete transparency of decision procedures is logically inconsistent. Furthermore, we observe that attempts to justify indirect transparency on evolutionary grounds, by the development of physical characteristics that signal behavior, must fail. Finally, we suggest a model of partial transparency that is logically consistent and generates conditional cooperation.

Keywords: Rationality; evolution; cooperation; transparency

JEL-codes: C72

13 pages, April 1997

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