Inequality as information: Wealth homophily facilitates the evolution of cooperation

Free-riding produces inequality in the prisoners’ dilemma: cooperators suffer costs that defectors avoid, thus putting them at a material disadvantage to their anti-social peers. This inequality, accordingly, conveys information about a social partner’s choices in past game play and raises the possibility that agents can use the aggregation of past payoffs—i.e. wealth—to identify a social partner who uses their same strategy. Building on these insights, we study a computational model in which agents can employ a strategy—when playing multiple one-shot prisoners’ dilemma games per generation—in which they view other agents’ summed payoffs from previous games, choose to enter a PD game with the agent whose summed payoffs most-closely approximate their own, and then always cooperate. Here we show that this strategy of wealth homophily—labelled COEQUALS (“CO-operate with EQUALS”)—can both invade an incumbent population of defectors and resist invasion. The strategy succeeds because wealth homophily leads agents to direct cooperation disproportionately toward others of their own type—a phenomenon known as “positive assortment”. These findings illuminate empirical evidence indicating that viewable inequality degrades cooperation and they show how a standard feature of evolutionary game models—viz. the aggregation of payoffs during a generation—can double as an information mechanism that facilitates positive assortment.