Which hat to wear? Impact of natural identities on coordination and cooperation

As the workforce becomes increasingly diverse, motivating individuals from different backgrounds to work together effectively is a major challenge facing organizations. In an experiment conducted at a large public university in the United States, we manipulate the salience of participants' multidimensional natural identities and investigate the effects of identity on coordination and cooperation in a series of minimum-effort and prisoner's dilemma games. By priming a fragmenting (ethnic) identity, we find that, compared to the control, participants are significantly less likely to choose high effort in the minimum-effort games, leading to less efficient coordination. In comparison, priming a common organization (school) identity significantly increases the choice of a rational joint payoff maximizing strategy in a prisoner's dilemma game.     

Group membership,team preferences,and expectations

Group membership is a powerful determinant of social behaviour in a variety of experimental games. Its effect may be channelled primarily via the beliefs of group members, or directly change their social preferences. We report an experiment with a prisoner's dilemma with multiple actions, in which we manipulate players’ beliefs and show that group identity has a consistent positive effect on cooperation only when there is common knowledge of group affiliation. We also test the robustness of the minimal group effect using three different manipulations: one manipulation fails to induce group identity, and we observe an unsystematic effect of group membership when knowledge of affiliation is asymmetric.     

Coordination and cooperation in local,random and small world networks: Experimental evidence

A laboratory experiment has been designed to study coordination and cooperation in games played on local, random and small-world networks. For the coordination game, the results revealed a tendency for coordination on the payoff-dominant equilibrium in all three networks, but the frequency of payoff-dominant choices was significantly higher in small-world networks than in local and random networks. For the prisoner's dilemma game, cooperation was hard to reach on all three networks, with average cooperation lower in small-world networks than in random and local networks. Two graph-theoretic characteristics—clustering coefficient and characteristic path length—exhibited a significant effect on individual behavior, possibly explaining why the small-world network, with its high clustering coefficient and short path length, is the architecture of relations that drive a system towards equilibrium at the quickest pace.     

Inflation: The Invisible Foot of Macroeconomics*

We take a simple, well-known macroeconomic model and treat it as a game between two players—the government and an all-embracing union. The payoffs have the form of a prisoner's dilemma. The equilibrium outcome produces unwanted inflation and is not Pareto optimal. This is despite the fact that all participants are assumed to have full information. This result is shown to be quite robust to the form of the model and is not affected if one of the players is forced to announce its strategy in advance. This we call the invisible foot of macroeconomics.     

Reciprocity Game

This paper shows that reciprocity comes from the desire to cooperate in finitely repeated prisoner's dilemma game. Before playing the finitely repeated prisoner's dilemma game, players choose the reciprocity level and commit to it, and the reciprocity level is public information. There are T equilibria if the prisoner's dilemma game is repeated for T periods, and each equilibrium is associated with different levels of cooperation. Further, if players choose their reciprocity levels sequentially, then the most cooperative equilibrium will be the unique equilibrium. However, reciprocity does not matter for the one‐period game and the infinitely repeated game.     

Maximum‐revenue versus Optimum‐welfare Export Taxes: a Delegation Game*

In the Eaton and Grossman (1986 ) Bertrand duopoly model of strategic export taxes, both countries may be better off if they both delegate to policymakers who maximize tax revenue rather than welfare. However, both countries delegating to policymakers who maximize tax revenue is not a Nash equilibrium unless the degree of product substitutability is sufficiently high. For a wide range of values for the degree of product substitutability, the game is a prisoner's dilemma where both countries are better off delegating to policymakers who maximize tax revenue but both will delegate to policymakers who maximize welfare in the Nash equilibrium.     

Finite automata play the repeated prisoner's dilemma

The paper studies two-person supergames. Each player is restricted to carry out his strategies by finite automata. A player's aim is to maximize his average payoff and subject to that, to minimize the number of states of his machine. A solution is defined as a pair of machines in which the choice of machine is optimal for each player at every stage of the game. Several properties of the solution are studied and are applied to the repeated prisoner's dilemma. In particular it is shown that cooperation cannot be the outcome of a solution of the infinitely repeated prisoner's dilemma.     

To obey or not to obey? Can game theory explain human behavior in the context of coronavirus disease?

The objective of the current study is to explain noncompliance to social distancing rules in Western societies in the absence of a stringent law enforcement mechanism and vaccines. In the first part of the analysis, an evolutionary game theory mechanism of two players is developed. The theoretical model assumes the existence of the prisoner's dilemma due to personal inconveniences associated with mask wearing, hand washing, and lockdowns. The model demonstrates that in the absence of sufficient law enforcement mechanism, and regardless of the initial strategy undertaken, one of the three potential equilibria solutions is the convergence of the system to defection of both players. In the second part of the analysis, based on the freedom-house measures, we provide empirical evidence supporting the notion that law enforcement efficiency is higher in autocratic countries. We show the perseverance of higher projected infection rates per 100,000 persons in democratic countries even 8 months after the outbreak of the COVID-19 pandemic. Given the well-known inclination to cooperate more often than expected by game theory, this real-life outcome of noncompliance is remarkable. Moreover, the recent protests against lockdowns in China might reflect a shift from one equilibrium point (cooperation) to another (noncompliance).     

When a Precedent of Donation Favors Defection in the Prisoner's Dilemma

Abstract. In this paper, we examine the question of whether a collective activity can influence cooperation in a subsequent repeated one‐shot prisoner's dilemma (PD) game. We conduct two series of experiments. The first consists of control experiments in which 30 periods of a PD game are played, with a random rematching of the pairs in every period. In a second series of experiments, subjects first play a donation game (DG) and then the PD game. In the DG, they collectively discuss the amount of a donation to a given charity, before putting the question to an individual and anonymous vote. Cooperation levels in the PD games preceded by the DG are significantly lower than those observed in the control experiment.     

How Robust is Laboratory Gift Exchange?

The gift-exchange game is a form of sequential prisoner's dilemma, developed by Fehr et al. (1993), and popularized in a series of papers by Ernst Fehr and co-authors. While the European studies typically feature a high degree of gift exchange, the few U.S. studies provide some conflicting results. We find that the degree of gift exchange is surprisingly sensitive to an apparently innocuous change—whether or not a comprehensive payoff table is provided in the instructions. We also find significant and substantial time trends in responder behavior.     

In-class Simulations of the Iterated Prisoner's Dilemma Game

The author developed a simple computer program for the in-class simulation of the repeated prisoner's dilemma game with student-designed strategies. He describes the basic features of the software and presents two examples for the use of the program in teaching the problems of cooperation among profit-maximizing agents.     

Does the Cost Paradox Preclude Technological Progress under Imperfect Competition?

We consider a two‐stage model of R&D/Cournot competition with isoelastic demand satisfying the cost paradox (i.e., that equilibrium profits increase with unit cost). The R&D process has a binary structure, with spillover effects. We provide a negative answer to the question in the title: Under noncooperative R&D, firms will conduct R&D for a broad parameter range, despite the presence of the cost paradox, as a result of being caught in a prisoner's dilemma. A second‐best social planner is shown to have a higher propensity for R&D than the noncooperative scenario. However, if firms engaged in any of the known R&D cooperation scenarios, the answer to the question in the title would become affirmative. It follows that R&D cooperation leads to lower producer and consumer surpluses. This constitutes a major departure from the conclusions of the standard R&D model. Therefore, R&D cooperation in such environments should not receive favorable antitrust treatment.     

PERCEIVED INTENTIONALITY IN 2 × 2 EXPERIMENTAL GAMES

We test experimentally whether decisions in 2 × 2 games with mixed equilibria depend on the co‐player being nature or a human agent. Controlling for social preferences, we find differences in decisions in the chicken game and battle of the sexes but not for stag hunt and matching pennies. We attribute these to subjects' perception of the other's intentionality and disapproval avoidance in particular.     

Religious fragmentation,social identity and cooperation: Evidence from an artefactual field experiment in India

We study the role of village-level religious fragmentation on intra- and inter-group cooperation in India. We report on data on two-player prisoners׳ dilemma and stag hunt experiments played by 516 Hindu and Muslim participants in rural India. Our treatments are the identity of the two players and the degree of village-level religious heterogeneity. In religiously heterogeneous villages, cooperation rates in the prisoners׳ dilemma, and to a lesser extent the stag hunt game, are higher when subjects of either religion play with a fellow in-group member than when they play with an out-group member or with someone whose identity is unknown. Interestingly, cooperation rates among people of the same religion are significantly lower in homogeneous villages than in fragmented villages in both games.     

Vertical differentiation in a Cournot industry: The Porter hypothesis and beyond

We modify the vertically differentiated duopoly model by André et al. (2009) replacing Bertrand with Cournot behaviour, and we characterise the region wherein a Porter-type result takes place. We show that the Porter hypothesis applies in an equilibrium taking always the form of a prisoner's dilemma. Moreover, whenever the asymmetry in the cost parameters between green and brown technology is not too high, a class of equilibria emerges wherein firms converge spontaneously onto the green standard as a result of dominant strategies, any environmental regulation being altogether absent.     

Patents,imitation and welfare

We consider the effects of product and process patents on profits and welfare. In a duopoly model, we show that if the cost of imitation is not very large, prisoner's dilemma occurs under process patent, thus creating lower profit of each firm under process patent than under product patent. Welfare is higher under process (product) patent for very small (not very small) cost of imitation. Although the possibility of cross-licensing never makes lower welfare under process patent for all costs of imitation, welfare is never lower under product patent under infinitely repeated game.     

Annual Index

The authors present a constructivist approach for teaching game theory, on the basis, in part, of Axelrod's research approach. Using the Axelrod tournament multi-user system (ATMUS) software, students create strategies for a repeated prisoner's dilemma (RPD). Later, these strategies are matched with those of their classmates' in a classroom tournament while the instructor interactively and graphically demonstrates the behavior of the strategies. A two- to three-week instructional implementation strategy is provided to highlight effective use of the ATMUS software, according to constructivist learning principles, to ensure that students are engaged in critical thinking regarding RPD.     

Behavior in one-shot traveler’s dilemma games: model and experiments with advice

We report results of one-shot traveler’s dilemma game experiments to test the predictions of a model of introspection. The model describes a noisy out-of-equilibrium process by which players reach a decision of what to do in one-shot games. To test the robustness of the model and to compare it to other models of introspection without noise, we introduce non-binding advice. Advice has the effect of coordinating all players’ beliefs onto a common strategy. Experimentally, advice is implemented by asking subjects who participated in a repeated traveler’s dilemma game to recommend an action to subjects playing one-shot games with identical parameters. In contrast to observations, models based on best-response dynamics would predict lower claims than the advised. We show that our model’s predictions with and without advice are consistent with the data.      

Are smarter groups more cooperative? Evidence from prisoner's dilemma experiments, 1959–2003

Are more intelligent groups better at cooperating? A meta-study of repeated prisoner's dilemma experiments run at numerous universities suggests that students cooperate 5–8% more often for every 100-point increase in the school's average SAT score. This result survives a variety of robustness tests. Axelrod [Axelrod, R., 1984. The Evolution of Cooperation. Basic Books, New York] recommends that the way to create cooperation is to encourage players to be patient and perceptive; experimental evidence suggests that more intelligent groups implicitly follow this advice.     

The ultrasocial origin of the Anthropocene

The current geological epoch has been dubbed the Anthropocene—the age of humans. We argue that the roots of the Anthropocene lie in the agricultural revolution that began some 8000 years ago. Unique human psychological and cultural characteristics were present in our distant hunter–gatherer past, but in terms of the biophysical impact of our species, agricultural represented an unequivocal and decisive evolutionary break. With the transition to agriculture human society began to function as a superorganism functioning as a single unit designed by social natural selection to produce economic surplus. Where environmental conditions were permitted, early human agricultural societies followed the same pattern as a few social insects and exhibited explosive population growth, complex and detailed division of labor, intensive resource exploitation, territorial expansion, and a social organization favoring the survival and growth of the supergroup over the well-being of individuals within the group. Similar economic forces lie behind ultrasociality in social insects and humans—increased productivity from the division of labor, increasing returns to scale, and the exploitation of stocks of productive resources. Exploring the evolutionary mechanisms behind ultrasociality offers insights into the growth imperative that threatens the stability of the earth's life support systems.