| Abstract: |
The efficiency-enhancing role of the vengeance motive is illustrated in a
simple social dilemma game in extensive form. Incorporating behavioral noise
and observational noise in random interactions in large groups leads to seven
continuous families of (short run) Perfect Bayesian equilibria (PBE) that
involve both vengeful and non-vengeful types. A new long run evolutionary
equilibrium concept, Evolutionary Perfect Bayesian Equilibrium (EPBE), shrinks
the equilibrium set to two points. In one EPBE, only the non-vengeful type
survives and there are no mutual gains. In the other EPBE, both types survive
and reap mutual gains. |