A moral of the story is that models that aim to explore fundamental processes should be judged by their fruitfulness, not by their accuracy. For this… - Robert Axelrod

Proposition 2. TIT FOR TAT is collectively stable if and only if, w is large enough. This critical value of w is a function of the four payoff parameters, T; R, P, and S.

The Cooperation Theory that is presented in this book is based upon an investigation of individuals who pursue their own self-interest without the aid of a central authority to force them to cooperate with each other. The reason for assuming self-interest is that it allows an examination of the difficult case in which cooperation is not completely based upon a concern for others or upon the welfare of the group as a whole. It must, however, be stressed that this assumption is actually much less restrictive than it appears.

In this essay, we have developed and illustrated an approach for predicting the membership of alliances among firms developing and sponsoring products requiring technical standardization. We started with two simple and plausible assumptions, that a firm prefers (1) to join a large standardsetting alliance in order to increase the probability of successfully sponsoring a compatibility standard, and (2) to avoid allying with rivals in order to benefit individually from compatibility standards that emerge from the alliance’s efforts. We then defined the concept of utility as an approximation to profit maximization in terms of size and rivalry, and discussed the influences on incentives to ally in order to develop and sponsor standards. We showed that the Nash equilibria are the local minima of an energy function with this type of utility function.