Principles of Economics- Mankiw (5th) 356

Principles of Economics- Mankiw (5th) 356 - 366 PA R T F I...

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366 PART FIVE FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY How would the other player’s actions affect your subsequent decisions about confessing? Repeated prisoners’ dilemma is quite a complicated game. To encourage cooperation, players must penalize each other for not cooperating. Yet the strat- egy described earlier for Jack and Jill’s water cartel—defect forever as soon as the other player defects—is not very forgiving. In a game repeated many times, a strategy that allows players to return to the cooperative outcome after a pe- riod of noncooperation may be preferable. To see what strategies work best, political scientist Robert Axelrod held a tournament. People entered by sending computer programs designed to play repeated prisoners’ dilemma. Each program then played the game against all the other programs. The “winner” was the program that received the fewest total years in jail. The winner turned out to be a simple strategy called
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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