If the Prisoners’ Dilemma game is repeated a finite number of times, then (a) co

Question

If the Prisoners’ Dilemma game is repeated a finite number of times, then

(a) cooperation cannot be achieved because players cannot reason what will happen in successive periods.

(b) cooperation cannot be achieved because additional punishment cannot be imposed after the last period.

(c) cooperation can be achieved because players will not know each other’s prior moves until the last period.

(d) cooperation can be achieved because players can punish each other for not cooperating.

WHY AND HOW TO SOLVE

Explanation / Answer

Although the Prisoner's dilemma has only one Nash equilibrium (everyone defect), cooperation can be sustained in the repeated Prisoner's dilemma if the discount factor is not too high; that is, if the players are interested enough in future outcomes of the game. Strategies known as trigger strategies comprise Nash equilibria of the repeated Prisoner's dilemma. However, Prisoner's dilemma is one where the minmax value is equal to the Nash Equilibrium payoff. This means that a player who knows the exact horizon may just decide to switch to Defect without fear of punishment.

Therefore the correct option would be D) cooperation can be achieved because players can punish each other for not cooperating.

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