Keywords
oligopoly, prisoner's dilemma, coordination, cooperative equilibria, game theory
Abstract
The idea that evolutionary processes natrually propel a state of affairs toward a higher, perhaps more complex or advanced, state of affairs is one that may extend to any context characterized by a dynamic time frame, including ogliopoly moelds of repeated Prisoner's Dilemma. The author argues that, contrary to the popular assertion that coordinated pricing necessarily requires voluntary coordination, oligopoly markets may evolve to a state of cooperation—one of collective profit maximization—absent a conscious state of coordination among the players, or even knowledge of such cooperation. While Professor Donald Turner proposes a theory of cooperation based on forward-looking consideration of future reaction, and similarly, George Stigler presents a theory of cooperation based on fear of detection and retaliation, this author proposes a theory of evolution to cooperation based on the progression of consequences from previous actions. This Comment extends Stigler’s model from a theory of tacit interaction and sustained collusion based on a player’s ability to detect other players’ defections to a theory of independent action based on a player’s natural tendency to implement payoff-maximizing strategies by comparing previous performance to current performance and adjusting conduct accordingly. The author proposes that neither conscious coordination nor information exchange is necessary to achieve cooperative equilibria. Rather, an evolutionary process that parallels Darwinian biological evolution propels economic markets toward states of cooperative equilibrium.
Recommended Citation
Hillel Bavli,
A Model of Abstract Cooperation in Games of Uncertainty,
32 Fordham Urb. L.J. 831
(2005).
Available at: https://ir.lawnet.fordham.edu/ulj/vol32/iss5/2