Center for the Study of Rationality

We consider a multitype population model with unobservable types, in which players are engaged in the ‘mutual help’game: each player can increase her partner’s …tness at a cost to oneself. All individuals prefer free riding to cooperation, but some of them, helpers, can establish reciprocal cooperation in a long-term relationship. Such heterogeneity can drive cooperation through a partner selection mechanism under which helpers choose to interact with one another and shun non-helpers. However, in contrast to the existing literature, we assume that each individual is matched with an anonymous partner, and therefore, stable cooperation cannot be achieved by partner selection per se. We suggest that helpers can signal their type to one another in order to establish long-term relationships, and we show that a reliable signal always exists. Moreover, due to the di¤erence in future bene…ts of a long-term relationship for helpers and non-helpers, the signal need not be a handicap, in the sense that the cost of the signal need not be correlated with type.