() and Matthias Blonski
Giancarlo Spagnolo: S.S.E., University of Mannheim, and CEPR, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden
Matthias Blonski: Dept. of Economics, University of Mannheim, Postal: Seminargebaude A5, D-68131 Mannheim, Germany
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.
11 pages, First version: February 20, 2001. Revised: August 4, 2001. Earlier revisions: February 20, 2001, February 27, 2001, April 19, 2001.
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