Foundations for Cooperation in the Prisoners’ Dilemma

Brendan Daley and Philipp Sadowski

No 13-17, Working Papers from Duke University, Department of Economics

Abstract: We provide axiomatic foundations for a simple model of play in the prisoners’ dilemma. The model accommodates cooperation and suggests that players behave as if their expectations about their opponents’ behavior vary with their own choice. We refer to this nonstandard updating as magical thinking. The degree to which players exhibit magical thinking may be heterogeneous in the population and is captured by a uniquely identified parameter for each player. Further, it is as if all players perceive these parameters to be i.i.d. draws from a common distribution. The model’s identification allows for tractable comparative statics.

Keywords: Prisoners’ dilemma; magical thinking; cooperation (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Pages: 40
Date: 2013
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-evo, nep-gth, nep-hpe and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:duk:dukeec:13-17

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