A solution concept for games with altruism and cooperation



Valerio Capraro

Monday, September 9, 2013
4:00pm 5130
Upson Hall



Over the years, numerous experiments have been accumulated to show that cooperation is not casual and depends on the payoffs of the game. These findings suggest that humans have attitude to cooperation by nature and the same person may act more or less cooperatively depending on the particular payoffs. In other words, people do not act a priori as single agents, but they forecast how the game would be played if they formed coalitions and then they play according to their best forecast.

In the paper, I formalize this idea and I define a new solution concept for one-shot normal form games.

I prove that this "cooperative equilibrium" explains a number of different experimental findings, such as (1) the rate of cooperation in the Prisoner's dilemma depends on the cost-benefit ratio; (2) the rate of cooperation in the Traveler's dilemma depends on the bonus/penalty; (3) the rate of cooperation in the Publig Goods game depends on the pro-capite marginal return and on the numbers of players; (4) the rate of cooperation in the Bertrand competition depends on the number of players; (5) players tend to be fair in the bargaining problem; (6) players tend to be fair in the Ultimatum game; (7) players tend to be altruist in the Dictator game; (8) offers in the Ultimatum game are larger than offers in the Dictator game.

Next, in a joint work with Nick Jennings, Maria Polukarov, and Matteo Venanzi, we extend these ideas to define algorithmically the cooperative equilibrium for some relevant iterated games, as the Prisoner's dilemma, the Traveler's dilemma, and the Public Goods game and we show that the predictions are close to the experimental data.