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Authordc.contributor.authorRojas Olivares, Marcos 
Authordc.contributor.authorVergara Domínguez, Damián 
Abstractdc.description.abstractThis paper studies the effects of ambiguity on long-run cooperation, by analyzing the infinitely repeated Prisoner’s Dilemma and its application to Cournot’s duopoly model. We show that ambiguity decreases the likelihood of cooperation in the infinitely repeated Prisoner’s Dilemma, regardless the level of optimism. In the economic application, we find that ambiguity is positively related with static equilibrium quantities and negatively related with the probability of sustaining a tacit collusion, i.e. positively related with competition. In fact, the critical discount factor associated with the probability of achieving a collusive equilibrium can be even higher than one for some parametric combinations. Nevertheless, depending on the level of optimism, a discontinuity can arise when ambiguity is too high, emerging a situation where collusion can be implemented as a short-run equilibrium. That is due to the fact that, for some parametric combinations, the economic application stops being a particular case of the Prisoner’s Dilemma and start behaving as different games in which cooperation can be achieved as a short-run pure Nash equilibrium. Finally, an alternative interpretation suggests an equivalence result: a Cournot’s duopoly with high ambiguity and relatively pessimist players behaves as a coordination game with exogenous payoffsen_US
Publisherdc.publisherUniversidad de Chile, Facultad de Economía y Negociosen_US
Seriedc.relation.ispartofseriesSerie de documentos de trabajo;415
Type of licensedc.rightsAtribución-NoComercial-SinDerivadas 3.0 Chile*
Link to Licensedc.rights.uri*
Keywordsdc.subjectPrisoner’s Dilemmaen_US
Keywordsdc.subjectLong-run Cooperationen_US
Keywordsdc.subjectCournot Duopoly Modelen_US
Keywordsdc.subjectTacit Collusionen_US
Títulodc.titleAmbiguity and long-run cooperationen_US
Document typedc.typeDocumento de trabajoen_US

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Atribución-NoComercial-SinDerivadas 3.0 Chile
Except where otherwise noted, this item's license is described as Atribución-NoComercial-SinDerivadas 3.0 Chile