Repeated trade with a high discount factor enables cooperative equilibria.

Evidence

Now suppose that the players trade repeatedly. Let ail represent the action taken by player i in period t; let ~ ; ( u , , , u2,) represent the resulting payoff earned by player i in period t; and let 6 be the discount factor applied to compute the present value of a stream of payoffs. If trade is frequent, then 6 is close to one; if trade occurs only once (or is quite infrequent), then 6 is (close to) zero. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 47

Categorization

• XREF: The repeated-game framework is the standard Folk Theorem scaffold; connects to the ‘Godfather-bonds as credible commitments’ idea — repetition plus discounting is what turns goodwill into collateral in the Mafia’s enforcement ecology. — connects to: One-shot trade games yield cheating as the unique equilibrium. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 46; Frequent repeated interaction makes cooperative trade equilibria feasible, whereas infrequent trade does not.; Cooperative market norms can be stable equilibria even amid free-rider incentives — Lisa Bernestein, Opting out of the Legal System, 190 (+7 more)

Broader Connections

• Frequent repeated interaction makes cooperative trade equilibria feasible, whereas infrequent trade does not. #expands (0.95)
• Cooperative market norms can be stable equilibria even amid free-rider incentives #corroborates (0.80) — Lisa Bernestein, Opting out of the Legal System, 190
• Mutual trust in iterated exchange is selffulfilling through aligned incentives #expands (0.80)
• A continuing relationship functions as a bond deterring dishonest trading #exemplifies (0.80)
• Community boycotts can sustain cooperative trade as equilibrium without fixed trading partners. #qualifies (0.75) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 57
• A Law Merchant institution can sustain honest trade as an equilibrium #exemplifies (0.75) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 95
• A utilitarian commitment to overall welfare generally implies trustworthiness in mutual exchanges #corroborates (0.72)
• Trade institutions must solve both an information and a punishment-motivation problem #expands (0.70)