Voluntarily separable repeated Prisonerʼs Dilemma with reference letters

We consider the voluntarily separable repeated Prisonerʼs Dilemma model in which players randomly meet and form pairs to repeatedly play Prisonerʼs Dilemma only by mutual agreement. While the literature has dealt with the case of no information flow across partnerships, we consider the case in which players can issue a “reference letter” to verify at least that the partnership entered the cooperation phase. We show that such reference letters can be voluntarily provided by the partners even at some cost, and that the sheer existence of a letter shortens the trust-building periods and thus improves social efficiency.

[1]  Andrés Perea,et al.  Repeated games with voluntary information purchase , 2009, Games Econ. Behav..

[2]  W. MacLeod,et al.  Gift Giving and the Evolution of Cooperation , 1997 .

[3]  Michihiro Kandori,et al.  The Use of Information in Repeated Games with Imperfect Monitoring , 1992 .

[4]  Paul R. Milgrom,et al.  The role of institutions in the revival of trade: the law merchant , 1990 .

[5]  Hitoshi Matsushima.  Long-term partnership in a repeated prisoner's dilemma with random matching , 1990 .

[6]  Elchanan Ben-Porath,et al.  Communication in repeated games with costly monitoring , 2003, Games Econ. Behav..

[7]  Takako Fujiwara-Greve,et al.  Voluntarily Separable Repeated Prisoner's Dilemma , 2009 .

[8]  Rachel E. Kranton,et al.  The Formation of Cooperative Relationships , 1996 .

[9]  Michihiro Kandori.  Social Norms and Community Enforcement , 1992 .

[10]  Edward P. Lazear,et al.  Agency, Earnings Profiles, Productivity, and Hours Restrictions , 1981 .

[11]  Tadashi Sekiguchi,et al.  The folk theorem for repeated games with observation costs , 2004, J. Econ. Theory.

[12]  M. Okuno-Fujiwara,et al.  Social Norms and Voluntary Cooperation , 2007 .

[13]  Debraj Ray,et al.  Cooperation in Community Interaction Without Information Flows , 1996 .

[14]  C. Shapiro,et al.  Equilibrium Unemployment as a Worker Discipline Device , 1984 .

[15]  Andrew Postlewaite,et al.  Social Norms and Random Matching Games , 1995 .

[16]  Glenn Ellison.  Cooperation in the Prisoner's Dilemma with Anonymous Random Matching , 1994 .