Co-evolution of social reward and punishment under institutional interventions
Authors: Van An Nguyen, Vuong Khang Huynh, Hoai Thuong Nguyen, Duc Tin Duong, An Nguyen Gia, Tat Kien Nguyen, Huu Loi Bui, My Nguyen Tra, +9 more
Organizations: Faculty of Computer Science and Engineering, Ho Chi Minh City University of Technology (HCMUT), Vietnam · Vietnam National University - Ho Chi Minh City (VNU-HCM), Vietnam · School of Computing, Engineering and Digital Technologies, Teesside University,2026 United Kingdom · School of Mathematics, University of Birmingham, Birmingham, United Kingdom
Abstract
We investigate how peer and institutional incentives jointly shape the evolution of cooperation, social welfare, and enforcement efficiency in social dilemmas. In a Prisoners Dilemma with four strategies, unconditional cooperators (C), defectors (D), social punishers (SP), and social rewarders (SR), we allow decentralised peer incentives and centralised institutional incentives to act simultaneously, with the institution able to reward or punish any subset of strategies. In infinite well-mixed populations, we analyse the resulting four-strategy replicator dynamics, and in structured populations we use agent-based simulations on square lattices to study spatial effects and network reciprocity. Intervention schemes are evaluated by equilibrium states and evolutionary flow for infinite well-mixed populations, by cooperation levels and social welfare for structured populations, defined as aggregate population payoff net of institutional cost. We find that peer punishment most strongly promotes cooperation, whereas peer reward is more beneficial for social welfare. Institutionally rewarding peer incentive strategies substantially improves both cooperation and welfare, while subsidising unconditional cooperators has little impact. Under institutional punishment, directly penalising defectors is the only consistently effective policy; punishing peer incentive strategies dismantles decentralised incentives, reduces cooperation, and harms social welfare, showing that maximising cooperation does not necessarily optimise overall societal benefit. Our findings provide design principles for institutions seeking to balance cooperation promotion with welfare maximisation.
Institutional incentives are widely used to promote cooperation among autonomous, self-regarding agents, from human societies to multi-agent and AI systems. Existing work typically treats incentive design as a bi-objective problem: minimise institutional cost while achieving a high long-run frequency of cooperation. Whether such schemes also maximise social welfare - total population payoff net of institutional expenditure - has remained largely unexplored. We develop a welfare-centric framework for institutional incentives in finite, well-mixed populations playing a social dilemma (Donation Game and Public Goods Game), considering both rewards for cooperators and punishments for defectors. For each mechanism, we derive explicit expressions for expected social welfare and characterise how it depends on incentive efficiency and selection intensity. Analytically, we identify parameter regimes where social welfare has a single optimal incentive level and regimes with qualitative phase transitions, in which welfare becomes non-monotonic with multiple local optima. We prove that any welfare-maximising incentive is either zero or concentrated around a simple closed-form target, and we provide an efficient algorithm to compute these optima. Comparing reward and punishment, we further derive close-formed conditions under which reward outperform punishment in terms of social welfare for any given budget. Overall, our results reveal a systematic gap between incentives optimised for cost or cooperation frequency and those that maximise welfare.
Mixed-motive scenarios are ubiquitous in real-world multi-agent interactions, where self-interested agents often defect for immediate rewards, overlooking the potential of altruistic cooperation to improve long-term gains and collective welfare. Peer punishment can deter defection, but as costly second-order altruism, its persistent imposition may undermine the punisher's interests. Existing approaches often struggle to effectively implement punishment to promote cooperation. To balance the efficacy and cost of punishment, we propose Adaptive Punishment for Cooperation (APC), a distributed method that determines punishment intensity based on both a dynamic punishment probability and the severity of defection. This dynamic probability substantially reduces costly and ineffective punishment while also promotes cooperation. To accurately assess defection and its severity, we use a defection awareness module, whose learning is guided by game reward. Theoretical analysis and empirical results show APC performs effectively in iterated public goods game. Empirically, APC also significantly outperforms existing baselines across sequential social dilemmas, learning rational and effective punishment policies that foster cooperation by strategically deterring defection.
In social dilemmas self-interested learning agents face the choice between the societal benefit of cooperation and the immediate reward of defection. Significant evidence exists on the benefits of assortment mechanisms such as partner selection for the emergence of cooperation, but this is largely available through agent-based simulations. In this paper, we provide an analytical solution to the problem, studying the policy-gradient dynamics in a multi-agent environment with partner selection. We show how partner selection changes the opponent distribution and hence the reward landscape, and prove this promotes cooperation under simple rules known from the literature. In particular, we find that population variance is a necessary condition for cooperation to emerge. Using a two-dimensional Wiener process, we extend the dynamics to capture the stochastic effects of partner selection and the resulting opponent distribution. We derive a sufficient condition for the population to be cooperation-promoting and prove the existence of a stationary distribution. Simulations confirm that the stochastic model accurately captures the policy-gradient dynamics and clarifies how the learning rate affects the emergence of cooperation.