Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Abstract: Indirect reciprocity describes a class of reputation-based mechanisms which may explain the prevalence of cooperation in groups where partners meet only once. The first model for which this has analytically been shown was the binary image scoring mechanism, where one's reputation is only based on one's last action. But this mechanism is known to fail if errors in implementation occur. It has thus been claimed that for indirect reciprocity to stabilize cooperation, reputation assessments must be of higher order, i.e. contingent not only on past actions, but also on the reputations of the targets of these actions. We show here that this need not be the case. A simple image scoring mechanism where more than just one past action is observed provides ample possibilities for stable cooperation to emerge even under substantial rates of implementation errors.

Keywords: cooperation, prisoner's dilemma, donation game, indirect reciprocity, image scoring, first-order assessment, evolutionary stability, altruism

JEL-codes: C72; D83 February 2014

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