Repeated Games Flashcards
Define: Repeated Game and state their two types
one in which a fixed set of players play the same game against one another a number of times.There is a reputation that can be built, or having the ability to punish. This means that a broader set of outcomes
1) infinitely repeated games
2) finitely repeated games
How does the Advertising PD Game change when it becomes played an infinite number of times?
It depends on which contingent or conditional strategy is used but it allows for the ability to cooperate.
what two strategies can players employ?
1) Trigger strategies: a player plays cooperatively so long as his/her opponent does so, but any defection by the opponent ‘triggers’ a period of punishment whereby the player plays non-cooperatively in response to his/her opponent’s defection for a specified time period
2) Grim strategy: cooperate with opponent until (s)he ceases to cooperate, then punish him/her by defecting yourself on every subsequent period for the rest of the game.
Will the players choose to cooperate in an infinitely played Prisoner’s Dilemma game?
If both firms employ a grim strategy it is possible for the firms to maintain cooperation as long as they stick to in subsequent periods and reach Pareto efficient outcome.
What does the prospect of cooperation in a infinitely played PD game depend on?
1) the length of the game, has to be infinitely played
2) the players patience, patient players will have low discount rates and place more weight on long term benefits than immediate ones.
3) Actual magnitude of payoffs that players obtain from the various outcomes.
Explain the paradox of backward induction in relation to finitely repeated games.
A - The final round of a finitely repeated PD game is just like a one-shot PD game, it is rational for players to cheat
B - given there is no future in which cooperation can occur (or when reputation matter), there is no long term benefits of doing so.
C - there is no reason for players to sacrifice short-run benefits to be had from cheating
D - rational for player to cheat in final period.
E - In deciding how to play in penultimate period, players know they’ll cheat in final period of game, no reason for players to cooperate in penultimate period because doing so will not yield any future benefits
F - rational players will cheat in every round of a finitely repeated PD game
What can experimental evidence tell us about cooperation in repeated games?
People frequently cooperate with one another in repeated PD games of known and finite length. The centipede/ penny game is a good illustration of that. Given the paradox of backward induction, the first player should pick 2 but this doesn’t happen.
Additionally, people propose much fairer divisions of the money on offer in the ‘ultimatum game’.
What is the meaning of the rational fool?
AMARTYA K. SEN, questions the game theory of understanding of rationality which claims that actors which act in ways that do not play maximising strategy for their payoffs are stupid.
Actually experimental subjects who violate the dictates of economic rationality when playing the finitely repeated PD game, or the centipede game, achieve outcomes which are Pareto superior.
What did Mark Granovetter mean by social embeddedness?
People are social beings whose identities, values, beliefs and goals are shaped by their location within networks of social relation.
in addition to pursuing their own self-interest, people also adhere to various social rules and norms.
thus his view abides by the idea that reason is not the slave of passions but can be used to override them. People he explains might not always make the decision that maximised their payoff but that is aligned with their commitment to a social norm.
How does Kantian rationality fit in with Granovetter’s understanding of how people come to make decisions?
Like Granovetter, Kant separated the motives that push people into action. Kant speaks about first and second tier preferences, one which is our desires: our lower order preferences and our second tier preferences which is where using our moral and ethical concerns we reflect on our first tier.
this is about behaviour that ‘ought’ to be rather than want.
What are social norms, give some examples.
Social norms act as a restriction on our actions, they are informal ties and societal concepts which we believe to bind our actions in a certain way.
1) trust - gives rights to mutual rights and obligations such as partnerships that arise
2) reciprocity - governs the notion of trust, to treat others like they would like to be treated so exploiting someone opportunistically because we can is wrong.
3) fairness
4) equality - this happens in the ultimatum game where people gave to divide a sum of money and one decides/rejects.
What is the famous example used by Brian Uzzi - the paradox of embeddedness
he uses the the example of garment manufacturers and fabric suppliers in NYC. the suppliers would prioritise orders that came from garment makers because they new last minute orders or changes could occur and return the manufacturers ordered their fabrics ahead of time to make up for cyclical slow downs in business throughout the year. even when manufacturers where moving to Asia, they continued to act reciprocally as much as possible. All these principles which are set up like a finite model of PD game suggest cooperation is unlikely but it happened.
Can belief in instrumental rationality of Hume determine the kind of person and so player someone would be?
Frank in 1993, carried out a study a showing that people who studied economics and were exposed to this type of thinking were more likely to free ride, offer more inequitable divisions in ultimatum game and defect, The belief in this time of rationality may also act in sorts as a self fulfilling prophecy increasing the fear in actors that people will defect.
How can the tragedy of the commons be avoided in an infinitely repeated model?
if the game is infinitely repeated, and if agents are sufficiently patient (i.e., if their discount rate is not too high), then agents may be able to sustain the cooperative outcome by adopting a strategy which involves them cooperating so long as their opponent does but reverting to uncooperative behaviour in order to punish their opponent if ever (s)he defects.
What did Ostrom mean by opportunity of the commons?
Ostrom expressed that the collective action problem that commons from managing resources acts as an opportunity to solve it and find a way to manage it. Smaller communities where the resource property rights are still held in the collective but manageable so that defecting can be noticed and punished works. Additionally where an understanding about what the resource is, how it is best used is crucial. Stability, homogeneity and language can all act as binding a small communities norms together to make the successful management of resources possible.
