Economic Theory

, Volume 8, Issue 2, pp 347–366 | Cite as

On uniquely implementing cooperation in the prisoners' dilemma

  • Bhaskar Chakravorti
  • John Conley
  • Bart Taub
Research Articles
  • 62 Downloads

Summary

We consider the problem of a principle who wishes to induce two agents playing a one shot prisoner's dilemma to behave cooperatively. We assume that the principal cannot observe the actions of the agents, and is not able to change the strategy sets or payoff functions in the underlying game. The only power the principle has is to randomly delay the arrival of payoffs. Specifically, agents choose their one shot strategies, and then the principle randomly determines whether these are “cheap talk”, or if payoffs should be distributed. If the round is cheap talk, then each agent observes the strategy choice of the other and play moves to a new round. This continues until payoffs are distributed. We establish conditions under which the probability of cheap talk can be chosen at the beginning of the induced game in such a way that full cooperation is the only equilibrium outcome. The sufficiency condition is met by a wide class of economic interpretations of the prisoners' dilemma, including those involving strategic complementarities among players.

JEL classification number

C72 

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Copyright information

© Springer-Verlag 1996

Authors and Affiliations

  • Bhaskar Chakravorti
    • 1
  • John Conley
    • 2
  • Bart Taub
    • 2
    • 3
  1. 1.The Monitor CompanyCambridgeUSA
  2. 2.Department of EconomicsUniversity of IllinoisChampaignUSA
  3. 3.Department of EconomicsUniversity of ChicagoChicagoUSA

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