The Extent of Cooperation∗

Compte and Postlewaite (2008, 2012) set out a model that assumed that peoples’ behavior was organized via mental systems, and employed that framework to analyze how people might cooperate in a repeated relationship with private monitoring with plausible strategies. That paper focussed on the case in which two people played a repeated prisoners dilemma game. In this paper we show that the basic insights of that model can be extended to (i) repeated games in which play is sequential in each period rather than simultaneous; (ii) the games that are played in each period differ; (iii) repeated play in which players in a group are repeatedly randomly matched to play a repeated prisoners dilemma game; and (iv) how the framework can be used to understand incentive compatible social norms. We further analyze the evolutionary stability of the particular mental system in our earlier paper.