Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/118068
Authors: 
Haag, Matthew
Lagunoff, Roger
Year of Publication: 
2003
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 54.2003
Abstract: 
This paper examines characteristics of cooperative behavior in a repeated, n-person, continuous action generalization of a Prisoner's Dilemma game. When time preferences are heterogeneous and bounded away from one, how “much” cooperation can be achieved by an ongoing group? How does group cooperation vary with the group's size and structure? For an arbitrary distribution of discount factors, we characterize the maximal average co-operation (MAC) likelihood of this game. The MAC likelihood is the highest average level of cooperation, over all stationary subgame perfect equilibrium paths, that the group can achieve. The MAC likelihood is shown to be increasing in monotone shifts, and decreasing in mean preserving spreads, of the distribution of discount factors. The latter suggests that more heterogeneous groups are less cooperative on average. Finally, we establish weak conditions under which the MAC likelihood exhibits increasing returns to scale when discounting is heterogeneous. That is, larger groups are more cooperative, on average, than smaller ones. By contrast, when the group has a common discount factor, the MAC likelihood is invariant to group size.
Subjects: 
Repeated games
Maximal average Cooperation likelihood
Heterogeneous discount factors
Returns to scale
JEL: 
C7
D62
D7
Document Type: 
Working Paper

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