The Optimal Level of Generosity in a Selfish, Uncertain Environment

Abstract

The tit-for-tat strategy in iterated prisoners' dilemma games is examined in the presence of disturbances. It is shown that performance deteriorates drastically at arbitrarily low noise levels. The situation may be remedied by introducing some unconditional generosity. This may be done without exposing oneself to the risk of exploitation by the other party.