Small Talk and Cooperation A Note on Bounded Rationality
Abstract Neyman has shown that bounded rationality can lead to cooperation in the finitely repeated prisoner's dilemma game, if the game is conducted by finite automata of fixed size. We obtain similar results utilizing finite automata which can send messages back and forth over a given communication channel. The communication protocol utilized does not involve the transfer of any relevant information. Rather, it saturates the computational resources of the players thus preventing them from engaging in complex strategies which could potentially undermine cooperation.