Consider the Adjusted Tit-for-Tat (ATFT) strategy according to which player i plays Honest at date 0 and then plays Cheat at date t + 1 if two conditions hold: (1) i made the play at date t that was specified by his equilibrium strategy and (2) M(h,, i ) did not make the play at date t that was specified by his equilibrium strategy. If either condition fails, then the ATFT strategy calls for i to play Honest. The ATFT strategy formalizes the idea that a trader who cheats will be punished by the next merchant he meets if that merchant is honest, e v h if that merchant is not the one who was cheated.

PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE O…, loc. 52