Plausible cooperation

Olivier Compte (1, 2) , Andrew Postlewaite (3)

1 PSE - Paris-Jourdan Sciences Economiques
2 PSE - Paris School of Economics
3 University of Pennsylvania

There is a large repeated games literature illustrating how future interactions provide incentives for cooperation. Much of the earlier literature assumes public monitoring. Departures from public monitoring to private monitoring that incorporate differences in players' observations may dramatically complicate coordination and the provision of incentives, with the consequence that equilibria with private monitoring often seem unrealistically complex or fragile. We set out a model in which players accomplish cooperation in an intuitively plausible fashion. Players process information via a mental system – a set of psychological states and a transition function between states depending on observations. Players restrict attention to a relatively small set of simple strategies, and consequently, might learn which perform well.

Mots clés: Repeated games; Private monitoring; Bounded rationality; Cooperation

Domaines: Economies et finances

Olivier Compte, Andrew Postlewaite. Plausible cooperation. Games and Economic Behavior, 2015, 91, pp.45-59. ⟨halshs-01204780⟩