Modeling Endogenous Social Networks: the Example of Emergence and Stability of Cooperation without Refusal

Abstract

Aggregated phenomena in social sciences and economics are highly dependent on the way individuals interact. To help understanding the interplay between socio-economic activities and underlying social networks, this paper studies a sequential prisoner's dilemma with binary choice. It proposes an analytical and computational insight about the role of endogenous networks in emergence and sustainability of cooperation and exhibits an alternative to the choice and refusal mechanism that is often proposed to explain cooperation. The study focuses on heterogeneous equilibriums and emergence of cooperation from an all-defector state that are the two stylized facts that this model successfully reconstructs.