The Normal form of the game is linked in the article
stag rabbit
stag 10,10 0,8
rabbit 8,0 7,7
Both players choose stag or rabbit and score according to the cell on the grid that matches both moves. So 10, 10 is better than 7,7 for everyone so it is Pareto optimal however a player choosing rabbit gets 8 or 7 versus 10 or 0 for stag, so the uncertainty is higher for stag.
I think a way to translate the article into this framework is to add players, reducing the likelihood of getting saddled with a zero if you trust. Then, when someone rabbits, redistribute from some 10s to the zero guy. Instead of 10 a lot and 0 some, you get 10 some and 9 a lot, better than 8 or 7 always. Hence credit card interest rates, and credit cards existing at all (you pay 14% because lots of folks default, but without a big pool it would be too risky for the lender)
However, lots of rabbits can swamp this arrangement; a bank run would be a good example. Then you rationally go rabbit because your 10 9 is turning into a 5 3.
So perhaps institutionalizing trust is approximately equal to diversification.
In real hunts, you have this one player called the "alpha male". If you think cooperation is the hallmark of such arrangements, try a bit of defiance...
I think a way to translate the article into this framework is to add players, reducing the likelihood of getting saddled with a zero if you trust. Then, when someone rabbits, redistribute from some 10s to the zero guy. Instead of 10 a lot and 0 some, you get 10 some and 9 a lot, better than 8 or 7 always. Hence credit card interest rates, and credit cards existing at all (you pay 14% because lots of folks default, but without a big pool it would be too risky for the lender)
However, lots of rabbits can swamp this arrangement; a bank run would be a good example. Then you rationally go rabbit because your 10 9 is turning into a 5 3.
So perhaps institutionalizing trust is approximately equal to diversification.