Foundation of Reciprocal Cooperation
The lessons described above apply in environments that support cooperation, but whether cooperation is supported at all depends crucially on the probability (called ω ) that the players will meet again, also called the discount parameter or, poetically, the shadow of the future. When ω is low – that is, the players have a negligible chance of meeting again – each interaction is effectively a single-shot Prisoner's Dilemma game, and one might as well defect in all cases (a strategy called "ALL D"), because even if one cooperates there is no way to keep the other player from exploiting that. But in the iterated PD the value of repeated cooperative interactions can become greater than the benefit/risk of a single exploitation (which is all that a strategy like TFT will tolerate).
Curiously, rationality and deliberate choice are not necessary, nor trust nor even consciousness, as long as there is a pattern that benefits both players (e.g., increases fitness), and some probability of future interaction. Often the initial mutual cooperation is not even intentional, but having "discovered" a beneficial pattern both parties respond to it by continuing the conditions that maintain it.
This implies two requirements for the players, aside from whatever strategy they may adopt. First, they must be able to recognize other players, to avoid exploitation by cheaters. Second, they must be able to track their previous history with any given player, in order to be responsive to that player's strategy.
Even when the discount parameter ω is high enough to permit reciprocal cooperation there is still a question of whether and how cooperation might start. One of Axelrod's findings is that when the existing population never offers cooperation nor reciprocates it – the case of ALL D – then no nice strategy can get established by isolated individuals; cooperation is strictly a sucker bet. (The "futility of isolated revolt".) But another finding of great significance is that clusters of nice strategies can get established. Even a small group of individuals with nice strategies with infrequent interactions can yet do so well on those interactions to make up for the low level of exploitation from non-nice strategies.
Read more about this topic: Evolution Of Cooperation
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