On the use of the prisoners' dilemma to analyze the relations between employment security, trust, and effort

Sociologists and political scientists have argued that the explanatory adequacy of economics is undermined by unreasonable assumptions of rationality. Yet interpretations that make strong rationality assumptions remain common. Analyses of the effects of employment security on work effort provide one example. The iterated prisoners' dilemma has been used to deduce a positive effect of employment security on work effort. Several difficulties with this approach are identified, including that the cooperative solution to the iterated prisoners' dilemma game i) requires infinite play or uncertainty about the end of the repetitions of the game; ii) is made less likely where there are structural bases for divergent interests; iii) ignores the possibility that employers might choose to shift the game to another arena. In general, there is the difficulty that employer-employee relations involve three simultaneous prisoners' dilemmas. The paper concludes that the hyper-rational approach implied in the prisoners' dilemma is an unpromising route for the analysis of the effects of employment security.