| Abstract: |
We present and analyze a local interaction model where agents play a bilateral
prisoner's dilemma game with their neighbors. Agents learn about behavior
through payoff-biased imitation of their interaction neighbors (and possibly
some agents beyond this set). We find that the [Eshel, I., L. Samuelson and A.
Shaked, 1998, Altruists, Egoists and Hooligans in a Local Interaction Model,
Am. Econ. Rev 88] result that polymorphic states are stochastically stable in
such a setting is not robust. In particular whenever agents use information
also of some agents beyond their interaction neighbors the unique stable
outcome is one where everyone chooses defection. Introducing a sufficiently
strong conformist bias into the imitation process we find that full
cooperation always emerges. Conformism is thus identified as a new mechanism
that can stabilize cooperation. |