Cooperation

We review game-theoretic models of cooperation with self-regarding agents, starting with retaliation against noncooperators and reputation-building in repeated dyadic interactions. We then study the Folk Theorem in large groups of self-regarding individuals with imperfect information. In contrast to the dyadic case with perfect information, we find that the level of cooperation deteriorates rapidly with larger group size and higher error rates. Moreover, there is no plausible account of how the dynamic, out-of-equilibrium, behavior of these models would support cooperative outcomes. We then analyze cooperation with other-regarding preferences, finding that a high level of cooperation can be attained in groups of substantial size and with modest informational requirements, and that conditions allowing the long term evolution of such social preferences are plausible.