Tit for Tat: over-rated

In a comment on last week’s Dear Economist, Carl Dahlman wrote:

As Axelrod showed many years ago, the most effective incentive scheme is also the simplest: tit-for-tat. Tit: if you do you chore well, I’ll up the ante by doing mine even better. Tat: if you don’t, I won’t either.

This turns out, surprisingly, not to be true, although it is very widely believed (and Carl’s comment is perfectly sensible). For a trenchant discussion, here is a brief essay from mathematician-turned-economist-turned-political philosopher, Ken Binmore. I find Ken’s style a little harsh, but I can’t argue with the man’s conclusions. Here is an important extract:

The two-state finite automaton TAT-FOR-TIT is the simplest example of the type of mean machine that emerges from Probst’s simulations. This strategy begins by defecting and continues to defect until the opponent also defects. At that point TAT-FOR-TIT switches to its co-operative state. It continues to co-operate until the opponent defects, which behaviour it punishes by returning to the defection state in which it started the game. A player using TAT-FOR-TIT therefore begins by trying to exploit his opponent, and only starts to co-operate if he finds that she is trying to exploit him in the same way that he is trying to exploit her.

The whole thing is slightly technical but well worth a read. Or read an old column of mine, which concludes:

In any case, “tit for tat” is not quite as successful as conventional wisdom would have you believe. A team from Southampton University kicked “tit for tat” off the top spot in a rerun of Axelrod’s tournament by entering a collection of team players who colluded with each other. Another successful strategy is “tat for tit,” which first tries to exploit the other person and plays nicely only if that doesn’t work. Another winning approach is even more depressing, punishing cheats with eternal vengeance.

It is known simply as “grim.”

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
Comment: To comment, please register with FT.com, which you can do for free here. Please also read our comments policy here.
Contact: Tim's contact address is: economist@ft.com
Time: UK time is shown on posts.
Follow: A link to the blog's RSS feeds is at the top of the page.
Follow on Twitter
FT blogs: See the full range of the FT's blogs here.