An Analysis Of The Effects Of Tit-for-Tat Strategy And Free Exit Right To Cooperitive Games

In the 90's of the 20th century, Lin's game theory hypothesis explained the failure of China's agricultural collectivization campaign. He suggested that exit rights were necessary for the existence of efficient collective farms. The elimination of exit right by the government changed the collective farm members from repeated games to one-shot game. Macleod suggested that self-enforcing contract can not be maintained under one-shot games. Dong and Dow challenged Lin's hypothesis. They pointed out one way of minimizing the number of free-riders in cooperative farms, eliminating exit right. Otherwise lazy agency will choose to exit in order to avoid punishment. In this paper, I will continue to develop Dong and Dow's model. This paper's outcome is in line with Dong and Dow's opinion. Free exit right is actually necessary to sustain cooperative games. However, the strategy that I will use to build new model is Tit-for-Tat strategy, but not trigger strategy. This strategy is from one of Axelrod's books: "The Evolution of Cooperation". Tit-for-Tat strategy can make the competitors to cooperate with eath other even when they are rational and selfish.This paper has the following conclusions: first, after comparing the scope of the time discount factors that can maintain cooperative games under Tit-for-Tat strategy and trigger strategy, I find that the scope of first time factor is larger than the second one. From this point, we can see that Tit -for-Tat strategy is more realistic. Second, as mentioned by Dong and Dow, the right to withdraw is necessary to maintain cooperative games, rather than an obstacle. Finally, I will outline some recommendations associated with Tit-for-Tat strategy and exit right.