Cooperation can survive even when cheating pays seven times more per round.
Evidence
For example, in the last line of Table 1, Cheating is seven times more profitable than playing Honest at each current round, the cost of querying the LM consumes one-third of the profits of Honest venturers, the cost of complaining is three times the profits of the venture, and half of any assets transferred in settlement of a judgment are lost. The judgment itself is six times what the Cheater could expect to earn from Honest trade with his next partner (nine times net of transaction costs). Nevertheless, if the inter-trade discount factor is at least 0.9, the LM system is in equilibrium and supports honest behavior, filing of valid complaints, and payment of judgments. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 122
Categorization
- XREF: Schelling’s credible commitments and the ‘shadow of the future’ — the point that a high discount factor (value placed on future trade) outweighs massive short-term temptation is the same logic underpinning Corleone’s Godfather-bonds. — connects to: Cooperation survives even when cheating pays hugely and system costs are steep.; The mere threat of dispute costs can deter cheating without real costs being paid. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 130; Cheating tempts traders while cooperation yields shared gains. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 42 (+2 more)
- SEED: An essay angle: what real-world enforcement systems sustain cooperation under absurdly stacked incentives, and what are the discount factors (future values) that keep them alive — from guilds to cartels to VPN review sites.
Broader Connections
- Cooperation survives even when cheating pays hugely and system costs are steep.
#corroborates(0.95) - The mere threat of dispute costs can deter cheating without real costs being paid.
#qualifies(0.75) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 130 - Cheating tempts traders while cooperation yields shared gains.
#expands(0.70) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 42 - Cooperation norms persist through credible punishment of defectors.
#responds-to(0.70) — Lisa Bernestein, Opting out of the Legal System, 193