Uncertainty and the Evolution of Cooperation

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Abstract
It is well known that inferential errors can induce nice but provocable strategies to engage in vendettas with each other. It is therefore generally believed that imperfect monitoring reduces the payoffs of such strategies and impairs the evolution of cooperation. The current literature, however, only scrutinizes specific strategies, either analytically or in particular tournaments. This article examines in a more general way how monitoring uncertainty affects the fate of cooperation in tournaments of the iterated prisoner's dilemma (IPD). The first set of results shows that imperfect monitoring does create a sharp trade-off between cooperativeness and unexploitability. The second set examines how random shocks affect the tournament payoffs of several large classes of strategies in the IPD, and shows how noise can help certain nice strategies. The third set analyzes how imperfect monitoring can facilitate the emergence of cooperation based on a population of non-nice strategies. Thus the idea that inferential uncertainty always harms nice strategies and always impairs the evolution of cooperation must be sharply qualified.

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