Research and Publications: Department of Business Economics and Public Policy : Kelley School of Business: Indiana University

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The department is home to the authors of Managerial Economics and Business Strategy and Games and Information: An Introduction to Game Theory, two of the nation’s leading textbooks in the field.

Research and Publications

Journal Articles

Cooperation in a Repeated Prisoner's Dilemma with Ostracism

1989, Journal of Economic Behavior and Organization

Eric Bennett Rasmusen, David Hirshleifer

Abstract

The unique Nash equilibrium of the finitely repeated n-person Prisoners’ Dilemma calls for defection in all rounds. One way to enforce cooperation in groups is ostracism: players who defect are expelled. If the group’s members prefer not to diminish its size, ostracism hurts the legitimate members of the group as well as the outcast, putting the credibility of the threat in doubt. Nonetheless, we show that ostracism can be effective in promoting cooperation with either finite or infinite rounds of play. The model can be applied to games other than the Prisoners’ Dilemma, and ostracism can enforce inefficient as well as efficient outcomes.

Citation

Rasmusen, Eric Bennett and David Hirshleifer (1989), "Cooperation in a Repeated Prisoner's Dilemma with Ostracism," Journal of Economic Behavior and Organization, Vol. 12, August, 87-106 (183).