"Finitely Repeated Prisoners' Dilemma with Small Fines: Penance Contract"

We investigate the finitely repeated prisoners' dilemma with explicit contractual devices. We show that full collusion can be achieved by incentivizing the players' final period of play with small fines. Our incentivizing modality is the penance contract, by which a player is penalized if (and only if) he deviates from the penance strategy in the final period. We show that using this contractual agreement brings the penance strategy profile into unique subgame perfect equilibrium and achieves full collusion without being overturned by renegotiation.

An introduction to quantum game theory

The application of the methods of quantum mechanics to game theory provides us with the ability to achieve results not otherwise possible. Both linear superpositions of actions and entanglement between the players' moves can be exploited. We provide an introduction to quantum game theory and review the current status of the subject.Comment: 8 pages, RevTeX; v2 minor changes to the text in light of referees comments, references added/update

Cooperation among strangers: an experiment with indefinite interaction

We study the emergence of norms of cooperation in experimental economies populated by strangers interacting indefinitely and lacking formal enforcement institutions. In all treatments the efficient outcome is sustainable as an equilibrium. We address the following questions: can these economies achieve full efficiency? Which institutions for monitoring and enforcement promote cooperation? Finally, what classes of strategies are employed to achieve high efficiency? We find that, first, cooperation can be sustained even in anonymous settings; second, some type of monitoring and punishment institutions significantly promote cooperation; and, third, subjects dislike indiscriminate strategies and prefer selective strategies.experiments, repeated games, cooperation, equilibrium selection, prisoners’ dilemma, random matching

Finitely Repeated Prisoners' Dilemma with Small Fines: Penance Contract

We investigate the finitely repeated prisoners' dilemma with explicit contractual devices. We show that full collusion can be achieved by incentivizing the players' final period of play with small fines. Our incentivizing modality is the penance contract, by which a player is penalized if (and only if) he deviates from the penance strategy in the final period. We show that using this contractual agreement brings the penance strategy profile into unique subgame perfect equilibrium and achieves full collusion without being overturned by renegotiation.

Cooperation cannot be sustained in a discounted repeated prisoners' dilemma with patient short and long run players

This study presents a modified version of the repeated discounted prisoners' dilemma with long and short-run players. In our setting a short-run player does not observe the history that has occurred before he was born, and survives into next phases of the game with a probability given by the current action profile in the stage game. Thus, even though it is improbable, a short-run player may live and interact with the long-run player for infinitely long amounts of time. In this model we prove that under a mild incentive condition on the stage game payoffs, the cooperative outcome path is not subgame perfect no matter how patient the players are. Moreover with an additional technical assumption aimed to provide a tractable analysis, we also show that payoffs arbitrarily close to that of the cooperative outcome path, cannot be obtained in equilibrium even with patient players

In?nitely Repeated Games with Public Monitoring and Monetary Transfers

In this paper, we study in?nitely repeated games with imperfect public monitoring and the possibility of monetary transfers. We develop an effcient algorithm to compute the set of pure strategy public perfect equilibrium payoffs for each discount factor. We also show how all equilibrium payoffs can be implemented with a simple class of stationary equilibria that use stick-and-carrot punishments