THE PROBLEM OF COOPERATION AND REPUTATION BASED CHOICE

The standard method when analyzing the problem of cooperation using evolutionary game theory is to assume that people are randomly matched against each other in repeated games. In this paper we discuss the implications of allowing agents to have preferences over possible opponents. We model reputation as a noisy observation of actual propensity to cooperate and illustrate how reputation based choice of opponents can explain both the emergence and deterioration of cooperation. We show that empirical and experimental evidence of cooperation is consistent with our hypothesis that people behave so as to minimize the risk of damaging their reputation as nice, cooperative persons