Advertisement

Social Choice and Welfare

, Volume 51, Issue 1, pp 65–77 | Cite as

Approval mechanism to solve prisoner’s dilemma: comparison with Varian’s compensation mechanism

  • Tatsuyoshi Saijo
  • Takehito Masuda
  • Takafumi Yamakawa
Original Paper

Abstract

After having played a prisoner’s dilemma, players can approve or reject the other’s choice of cooperation or defection. If both players approve the other’s choice, the outcome is the result of the chosen strategies in the prisoner’s dilemma; however, if either rejects the other’s choice, the outcome is the same as if they had mutually defected from the prisoner’s dilemma. In theory, such an approval mechanism implements cooperation in backward elimination of weakly dominated strategies, although this is not the case in the subgame perfect Nash equilibrium. By contrast, the compensation mechanism proposed by Varian (Am Econ Rev 84(5):1278–1293, 1994) implements cooperation in the latter but not in the former. This result motivates the present experimental study of the two mechanisms. The approval mechanism sessions yield a cooperation rate of 90% in the first period and 93.2% across periods, while the compensation mechanism sessions yield a cooperation rate of 63.3% in the first period and 75.2% across periods. In addition, the backward elimination of weakly dominated strategies better predicts subjects’ behavior than does the subgame perfect Nash equilibrium in both mechanism sessions.

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Supplementary material

355_2017_1107_MOESM1_ESM.docx (357 kb)
Supplementary material 1 (docx 356 KB)

References

  1. Andreoni J, Varian H (1999) Preplay contracting in the prisoners’ dilemma. Proc Natl Acad Sci 96(19):10933–10938CrossRefGoogle Scholar
  2. Andreoni J, Miller JH (1993) Rational cooperation in the finitely repeated prisoner’s dilemma: experimental evidence. Econ J 103(418):570–585CrossRefGoogle Scholar
  3. Banks JS, Plott CR, Porter DP (1988) An experimental analysis of unanimity in public goods provision mechanisms. Rev Econ Stud 55(2):301–322CrossRefGoogle Scholar
  4. Beatty T, Crawford I (2011) How demanding is the revealed preference approach to demand? Am Econ Rev 101(6):2782–2795CrossRefGoogle Scholar
  5. Blonski M, Spagnolo G (2015) Prisoners’ other dilemma. Intl J Game Theory 44(1):61–81CrossRefGoogle Scholar
  6. Bracht J, Figuieres C, Ratto M (2008) Relative performance of two simple incentive mechanisms in a public goods experiment. J Pub Econ 92(1):54–90CrossRefGoogle Scholar
  7. Brams SJ, Kilgour DM (2009) How democracy resolves conflict in difficult games. In: Levin S (ed) Games, groups, and the global good. Springer, Berlin, pp 229–241CrossRefGoogle Scholar
  8. Charness G, Fréchette GR, Qin C-Z (2007) Endogenous transfers in the prisoner’s dilemma game: an experimental test of cooperation and coordination. GEB 60(2):287–306Google Scholar
  9. Chen Y (2008) Incentive-compatible mechanisms for pure public goods: a survey of experimental literature. In: Plott CR, Smith VL (eds) The handbook of experimental economics results. Elsevier, Amsterdam, pp 625–643CrossRefGoogle Scholar
  10. Cooper R, DeJong DV, Forsythe R, Ross TW (1996) Cooperation without reputation: experimental evidence from prisoner’s dilemma games. GEB 12(2):187–218Google Scholar
  11. Davenport C (2015) Nations approve landmark climate accord in Paris. New York Times. Retrieved November 7, 2017 http://www.nytimes.com/2015/12/13/world/europe/climate-change-accord-paris.html
  12. Fehr E, Gächter S (2000) Cooperation and punishment in public goods experiments. Am Econ Rev 90(4):980–994CrossRefGoogle Scholar
  13. Fehr E, Powell M, Wilkening T (2014) Handing out guns at a knife fight: behavioral limitations of subgame-perfect implementation, ECON – Working Paper 171, University of ZurichGoogle Scholar
  14. Fischbacher U (2007) z-Tree: Zurich toolbox for ready-made economic experiments. Exp Econ 10(2):171–178CrossRefGoogle Scholar
  15. Forsythe R, Rietz T, Myerson R, Weber R (1996) An experimental study of voting rules and polls in three-candidate elections. Intl J Game Theory 25(3):355–383CrossRefGoogle Scholar
  16. Guala F (2012) Reciprocity: weak or strong? What punishment experiments do (and do not) demonstrate. Behav Brain Sci 35(01):1–15CrossRefGoogle Scholar
  17. Hamaguchi Y, Mitani S, Saijo T (2003) Does the Varian mechanism work? Emissions trading as an example. Intl J Bus Econ 2(2):85–96Google Scholar
  18. Huang X, Masuda T, Okano Y, Saijo T (2017) Cooperation among behaviorally heterogeneous players in social dilemma with stay or leave decisions. University of Arizona Department of Economics Working Paper series 2017-16Google Scholar
  19. Kalai E (1981) Preplay negotiations and the prisoner’s dilemma. Math Soc Sci 1(4):375–379CrossRefGoogle Scholar
  20. Kimbrough EO, Sheremeta RM (2013) Side-payments and the costs of conflict. Intl J Ind Organ 31:278–286CrossRefGoogle Scholar
  21. Masuda T, Okano Y, Saijo T (2014) The minimum approval mechanism implements the efficient public good allocation theoretically and experimentally. Games Econ Behav 83:73–85CrossRefGoogle Scholar
  22. Midler E, Figuières C, Willinger M (2015) Choice overload, coordination and inequality: three hurdles to the effectiveness of the compensation mechanism? Soc Choice Welf 45(3):513–535CrossRefGoogle Scholar
  23. Plott CR, Smith VL (2008) Handbooks in economics 28: handbook of experimental economics results. Elsevier, AmsterdamGoogle Scholar
  24. Qin CZ (2005) Penalties and rewards as inducements to cooperate. Department of Economics, University of California-Santa BarbaraGoogle Scholar
  25. Saijo T, Okano Y, Yamakawa T (2016) The approval mechanism experiment: a solution to prisoner’s dilemma. KUT-SDES Working Paper no. 2015-12 (Revised), Kochi University of TechnologyGoogle Scholar
  26. Saijo T, Shen J (2018) Mate choice mechanism for solving a quasi-dilemma. J Behav Exp Econ 72:1–8CrossRefGoogle Scholar
  27. Selten R (1975) Reexamination of the perfectness concept for equilibrium points in extensive games. Intl J Game Theory 4(1):25–55CrossRefGoogle Scholar
  28. Selten R (1991) Properties of a measure of predictive success. Math Soc Sci 21(2):153–167CrossRefGoogle Scholar
  29. Varian HR (1994) A solution to the problem of externalities when agents are well-informed. Am Econ Rev 84(5):1278–1293Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Research Center for Future DesignKochi University of TechnologyKochiJapan
  2. 2.Research Institute for Humanity and NatureKyotoJapan
  3. 3.Institute of Social and Economic ResearchOsaka UniversityIbarakiJapan
  4. 4.TokushimaJapan

Personalised recommendations