Unless I’m missing something, the promise of cash transfers alone doesn’t fix the prisoners’ dilemma. If Alice expects Bob to cooperate and pay her $100 iff both cooperate, Alice’s best response is to cooperate and then pay Bob nothing. The standard logic of best responses makes everything unravel back to defection.
To fix incentives with conditional transfers, players need to commit to them. If they can do that though, why not just commit to cooperation directly? On decision-theoretic grounds alone, I don’t see why one would be easier than another. External commitment devices like escrow (through a trusted third party or cryptography) do rely on cash.
We agree on what the final payoffs in the PD should be, whether or not transfers make it easier. The point of this post is what payoffs agents should commit to in general two-person games with transfers, however they accomplish that commitment.
Unless I’m missing something, the promise of cash transfers alone doesn’t fix the prisoners’ dilemma. If Alice expects Bob to cooperate and pay her $100 iff both cooperate, Alice’s best response is to cooperate and then pay Bob nothing. The standard logic of best responses makes everything unravel back to defection.
To fix incentives with conditional transfers, players need to commit to them. If they can do that though, why not just commit to cooperation directly? On decision-theoretic grounds alone, I don’t see why one would be easier than another. External commitment devices like escrow (through a trusted third party or cryptography) do rely on cash.
We agree on what the final payoffs in the PD should be, whether or not transfers make it easier. The point of this post is what payoffs agents should commit to in general two-person games with transfers, however they accomplish that commitment.