ON UNIQUELY IMPLEMENTING COOPERATION IN THE PRISONERS-DILEMMA

We consider the problem of a principle who wishes to induce two agents playing a one shot prisoner's dilemma to behave cooperatively. We ass ume that the principal cannot observe the actions of the agents, and i s not able to change the strategy sets or payoff functions in the unde rlying game. The only power the principle has is to randomly delay the arrival of payoffs, Specifically, agents choose their one shot strate gies, and then the principle randomly determines whether these are ''c heap talk'', or if payoffs should be distributed. If the round is chea p talk, then each agent observes the strategy choice of the other and play moves to a new round. This continues until payoffs are distribute d. We establish conditions under which the probability of cheap talk c an be chosen at the beginning of the induced game in such a way that f ull cooperation is the only equilibrium outcome, The sufficiency condi tion is met by a wide class of economic interpretations of the prisone rs' dilemma, including those involving strategic complementarities amo ng players.