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Is it true that, in a repeated game, players are more likely to cooperate when their...

Is it true that, in a repeated game, players are more likely to cooperate when their discount (2) factors are closer to zero?

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Answer #1

Solution:

In game theory, discount factor simply indicates how much value the players place on the future payoff. In other words, it is the indication of patience of players. The cooperative strategy set is usually the one which generates the high payoff for both players, but will not be chosen by a player under Nash equilibrium, as it is not mutually the best response to play.

With discount factors close to 0, we're claiming that person care less about the future. In such a case, when a person's main focus will be the current situation, he/she is more likely to play the Nash equilibrium, that is more likely to break the cooperation, as cooperation is like a long term agreement including values of future periods, and with discount factor near to 0, players care less about it.

Thus, the given statement is not true.

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