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The collapse of cooperation in evolving games

Game theory provides a quantitative framework for analyzing the behavior of rational agents. The Iterated Prisoner's Dilemma in particular has become a standard model for studying cooperation and cheating, with cooperation often emerging as a robust outcome in evolving populations. Here we extend evolutionary game theory by allowing players' strategies as well as their payoffs to evolve in response to selection on heritable mutations. In nature, many organisms engage in mutually beneficial interactions, and individuals may seek to change the ratio of risk to reward for cooperation by altering the resources they commit to cooperative interactions. To study this, we construct a general framework for the co-evolution of strategies and payoffs in arbitrary iterated games. We show that, as payoffs evolve, a trade-off between the benefits and costs of cooperation precipitates a dramatic loss of cooperation under the Iterated Prisoner's Dilemma; and eventually to evolution away from the Prisoner's Dilemma altogether. The collapse of cooperation is so extreme that the average payoff in a population may decline, even as the potential payoff for mutual cooperation increases. Our work offers a new perspective on the Prisoner's Dilemma and its predictions for cooperation in natural populations; and it provides a general framework to understand the co-evolution of strategies and payoffs in iterated interactions.