The Co-Evolution of Cooperation and Defection Under Local Interaction and Endogenous Network Formation

The Prisoner's Dilemma is a typical structure of interaction in human societies. In spite of a long tradition dealing with the matter from different perspectives, the emergence of cooperation or defection still remains a controversial issue from both an empirical and a theoretical point of view. In this paper we propose a local interaction model with endogenous network formation, in the attempt to provide a reasonable account of emerging behaviors. A population of boundedly rational agents repeatedly chooses to cooperate or defect. Each agent's action affects only her interacting mates, according to a network of relationships. Agents are randomly given the possibility to substitute undesired mates with unknown ones. Full cooperation, full defection and coexistence of both cooperation and defection in homogeneous clusters are possible outcomes of the model. Computer-based simulations are applied to investigate under what circumstances either case is most likely.