Exit Threats and Cooperation under Anonymity

Abstract

A strategy contest in an iterated Prisoner's Dilemma with an exit option after each game is developed. The whole model is assumed to represent the conditions for egoistical cooperation in a large and anonymous society, which is based mainly on exchange relationships and voluntary cooperation between individuals; therefore, it is appropriate for studying the social stability of free markets. The strategies have no memory, effects of reputation do not exist, and defectors cannot be identified, traced, and held responsible for their actions. This scenario abandons the preconditions usually regarded as necessary for establishing cooperation. Nevertheless, egoistical cooperation may emerge in this model. It turns out that egoistical cooperation is much more robust than realized by most game-theoretical and sociological analyses.