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Isn't what you're doing the ipd equivalent of "retaliate"?

I guess so. Retaliation is the best strategy in iterative PD, no? (I'm rusty on this stuff).

Nash equilibrium in a regular PD would be DD, but it assumes that the other side will defect. I think from experience that the payoff grid is different in business in that instead of CC resulting in a lower payoff for C than for D in CD, it's a much higher payoff; and the D in CD is not getting much more than in DD (maybe 20% more).

You are thinking of tit for tat, right? I remember reading about generous T4T where in ~10% of the cases they were generous [CITATION NEEDED] it performed better that pure retaliation. Now there is a new paper in Nature[1] that I just stumbled onto in trying to answer your question. It seems like extortion is at least competitive with a generous strategy, though I need to give it a closer read.

[1] http://www.nature.com/ncomms/2016/160412/ncomms11125/full/nc...

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