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Article
Cooperation in the Prisoner’s Dilemma: The Rules Importance to Achieve Cooperation Equilibrium
Author(s)
Rodolfo Coelho Prates
Full-Text PDF
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DOI:10.17265/1537-1514/2012.10.004
Affiliation(s)
Rodolfo Coelho Prates, Ph.D., Associate Professor, Graduate Business School, Universidade Positivo.
ABSTRACT
This paper discusses the role of cooperation in the static game involving the prisoner’s dilemma. As depicted in the literature, the cooperation in games like that only happens when there is repetition of the decision situation. Initially, the paper presents a panoramic development of game theory and discusses the prisoner’s dilemma, as well as its use to illustrate Nash’s concept of equilibrium. Then, the paper discusses some concerns of the New Institutional Economics and how rules can influence the cooperation between agents. The implementation theory is used in order to establish the relationship between two major areas of study—Game Theory and the New Institutional Economics. That theory, which is a branch from the game theory, assumes the presence of a planner, who previously plans the final equilibrium of the game, and determines the rules of the game to achieve the expected balance. Based on that, the paper first discusses the rules of the prisoners’ dilemma and then presents a new game in which the original rules were changed so that cooperation is achievable. The new prisoners’ dilemma game allows for two different situations in which Nash Equilibrium can be reached the non-cooperative situation (traditional one) and a new cooperative equilibrium, showing that the rules influence cooperation. The theoretical results strengthen the legitimacy and the role of institutions—rules, laws and other instruments—as positive guidelines, informing social, economic, and business action.
KEYWORDS
game theory, prisoner’s dilemma, new institutional economics, cooperation
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