The Evolution of Trust

Game theory challenges many standard notions in economics regarding the efficiency of self-interested behavior and helps us understand more deeply the importance of institutions in influencing economic outcomes.

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1. According to the activity, what are the three key characteristics the tit-for-tat (or copycat) strategy has that makes it successful in the repeated games framework? What three prerequisites are necessary for tit-for-tat to be successful? To receive full credit, you must explain each of these characteristics/prerequisites.
2. Consider a time in which cooperation has broken down (either in your own life or in broader society). Explicitly using the concepts from part a, explain why cooperation and trust broke down.
3. How can institutions and public policy help promote cooperation? Using your example from part b, discuss how cooperation and trust can be regained and protected with proper institutional arrangements.