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Flexibility and Reputation in Repeated Prisoner’s Dilemma Games

Author

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  • Dorothée Honhon

    (Naveen Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

  • Kyle Hyndman

    (Naveen Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

Abstract
We study how three matching institutions, differing in how relationships are dissolved, affect cooperation in a repeated prisoner’s dilemma and how cooperation rates are affected by the presence of a reputation mechanism. Although cooperation is theoretically sustainable under all institutions, we show experimentally that cooperation rates are lowest under random matching, highest under fixed matching, and intermediate in a flexible matching institution, where subjects have the option to dissolve relationships. Our results also suggest important interactions between the matching institution and reputation mechanism. Under both the random matching and flexible matching institutions, both subjective (based on subjects’ ratings) and objective (based on subjects’ actions) reputation mechanisms lead to substantial increases in cooperative behavior. However, under fixed matching, only the subjective reputation mechanism leads to higher cooperation. We argue that these differences are due to different reputation mechanisms being more forgiving of early deviations from cooperation under certain matching institutions, which gives subjects the ability to learn the value of cooperation rather than getting stuck with a bad reputation and, consequently, uncooperative relationships.

Suggested Citation

  • Dorothée Honhon & Kyle Hyndman, 2020. "Flexibility and Reputation in Repeated Prisoner’s Dilemma Games," Management Science, INFORMS, vol. 66(11), pages 4998-5014, November.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:11:p:4998-5014
    DOI: 10.1287/mnsc.2019.3495
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    References listed on IDEAS

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    4. Serdarevic, Nina & Strømland, Eirik & Tjøtta, Sigve, 2021. "It pays to be nice: The benefits of cooperating in markets," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    5. Gao, Hongyu & Wang, Juan & Zhang, Fan & Li, Xiaopeng & Xia, Chengyi, 2021. "Cooperation dynamics based on reputation in the mixed population with two species of strategists," Applied Mathematics and Computation, Elsevier, vol. 410(C).
    6. Gabriele Camera & Alessandro Gioffré, 2024. "Cooperation in Temporary Partnerships," Working Papers - Economics wp2024_15.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    7. He, Yong & Zhao, Xuan & Krishnan, Harish & Jin, Shibo, 2022. "Cooperation among suppliers of complementary products in repeated interactions," International Journal of Production Economics, Elsevier, vol. 252(C).
    8. Ruth Beer & Hyun-Soo Ahn & Stephen Leider, 2022. "The Impact of Decision Rights on Innovation Sharing," Management Science, INFORMS, vol. 68(11), pages 7898-7917, November.
    9. Normann, Hans-Theo & Sternberg, Martin, 2022. "Human-algorithm interaction: Algorithmic pricing in hybrid laboratory markets," DICE Discussion Papers 392, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    10. Normann, Hans-Theo & Sternberg, Martin, 2023. "Human-algorithm interaction: Algorithmic pricing in hybrid laboratory markets," European Economic Review, Elsevier, vol. 152(C).
    11. Zhu, Wenqiang & Pan, Qiuhui & He, Mingfeng, 2022. "Exposure-based reputation mechanism promotes the evolution of cooperation," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    12. Ma, Yin-Jie & Jiang, Zhi-Qiang & Podobnik, Boris, 2022. "Predictability of players’ actions as a mechanism to boost cooperation," Chaos, Solitons & Fractals, Elsevier, vol. 164(C).
    13. Sibilla Di Guida & The Anh Han & Georg Kirchsteiger & Tom Lenaerts & Ioannis Zisis, 2021. "Repeated Interaction and Its Impact on Cooperation and Surplus Allocation—An Experimental Analysis," Games, MDPI, vol. 12(1), pages 1-19, March.
    14. Heller, Yuval & Tubul, Itay, 2023. "Strategies in the repeated prisoner’s dilemma: A cluster analysis," MPRA Paper 117444, University Library of Munich, Germany.

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