Sugden developed a model of exchange that demonstrates how, under certain conditions, a market norm that normally results in cooperation can be a stable, though not unique, equilibrium-even when there appear to be incentives for individuals to be free riders and transactors occasionally make mistakes (breach unintentionally). The game is an adaptation of the classic prisoner's dilemma model in which the following conditions hold: the benefit to player 1 of player 2 refraining from defecting b must be greater than the cost to player I of refraining from defecting himself c; the same must also be true for player 2; k , the probability that a subsequent round will be played, must be greater than b/c, since, if this condition did not hold, the expected gain from defection will be greater than any gain from alternative strategies.

DEFINE: Sugden's model formalizes the conditions under which a cooperation norm becomes a stable equilibrium in an iterated prisoner's dilemma. XREF: Relates to classic game theory and the iterated prisoner's dilemma, such as Axelrod's work on reciprocal altruism.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 190