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Should the government reward cooperation? Insights from an agent-based model of wealth redistribution

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Document pages: 19 pages

Abstract: In our multi-agent model agents generate wealth from repeated interactionsfor which a prisoner s dilemma payoff matrix is assumed. Their gains are taxedby a government at a rate $ alpha$. The resulting budget is spent to coveradministrative costs and to pay a bonus to cooperative agents, which can beidentified correctly only with a probability $p$. Agents decide at each timestep to choose either cooperation or defection based on different information.In the local scenario, they compare their potential gains from both strategies.In the global scenario, they compare the gains of the cooperative and defectivesubpopulations. We derive analytical expressions for the critical bonus neededto make cooperation as attractive as defection. We show that for the localscenario the government can establish only a medium level of cooperation,because the critical bonus increases with the level of cooperation. In theglobal scenario instead full cooperation can be achieved once the cold-startproblem is solved, because the critical bonus decreases with the level ofcooperation. This allows to lower the tax rate, while maintaining highcooperation.

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