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Approval Mechanism to Solve Prisoner’s Dilemma: Comparison with Varian’s Compensation Mechanism

Author

Listed:
  • Tatsuyoshi Saijo

    (Research Institute for Future Design, Kochi University of Technology)

  • Takehito Masuda

    (Institute of Social and Economic Research, Osaka University)

  • Takafumi Yamakawa

Abstract

After having played a prisoner's dilemma, players can approve or reject the other's choice of cooperation or defection. If both players approve the other's choice, the outcome is the result of the chosen strategies in the prisoner's dilemma; however, if either rejects the other's choice, the outcome is the same as if they had mutually defected from the prisoner's dilemma. In theory, such an approval mechanism implements cooperation in backward elimination of weakly dominated strategies, although this is not the case in the subgame perfect Nash equilibrium. By contrast, the compensation mechanism proposed by Varian (1994) implements cooperation in the latter but not in the former. This result motivates the present experimental study of the two mechanisms. The approval mechanism sessions yield a cooperation rate of 90% in the first period and 93.2% across periods, while the compensation mechanism sessions yield a cooperation rate of 63.3% in the first period and 75.2% across periods. In addition, the backward elimination of weakly dominated strategies better predicts subjects' behavior than does the subgame perfect Nash equilibrium in both mechanism sessions.

Suggested Citation

  • Tatsuyoshi Saijo & Takehito Masuda & Takafumi Yamakawa, "undated". "Approval Mechanism to Solve Prisoner’s Dilemma: Comparison with Varian’s Compensation Mechanism," Working Papers SDES-2016-15, Kochi University of Technology, School of Economics and Management.
    • Handle: RePEc:kch:wpaper:sdes-2016-15
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    File URL: http://www.souken.kochi-tech.ac.jp/seido/wp/SDES-2016-15.pdf
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    References listed on IDEAS

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    Cited by:

    1. Koffi Serge William Yao, 2021. "An Experiment on Cooperation in a CPR Game with a Disapproval Option," Games, MDPI, vol. 12(4), pages 1-14, October.
    2. Koffi Serge William Yao, 2021. "An Experiment on Cooperation in a CPR Game with a Disapproval Option," Post-Print hal-03418905, HAL.
    3. Saijo, Tatsuyoshi & Shen, Junyi, 2018. "Mate choice mechanism for solving a quasi-dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 72(C), pages 1-8.

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    More about this item

    Keywords

    prisoner's dilemma; approval mechanism; cooperation; backward elimination;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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