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Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence

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  • Matthias Blonski
  • Peter Ockenfels
  • Giancarlo Spagnolo

Abstract

We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion that is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor δ* strictly larger than δ, the standard criterion that has often been used in applications. In an experimental test we find a strong predictive power of our proposed criterion. For parameter changes where the standard and our criterion predict differently, changes in observed cooperation follow predictions based on δ* . (JEL C72, C73, C92, D81)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 3 (2011)
Issue (Month): 3 (August)
Pages: 164-92

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Handle: RePEc:aea:aejmic:v:3:y:2011:i:3:p:164-92

Note: DOI: 10.1257/mic.3.3.164
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  1. Heinemann, Frank & Nagel, Rosemarie & Ockenfels, Peter, 2004. "Measuring Strategic Uncertainty in Coordination Games," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 6, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. John Duffy & Jack Ochs, 2004. "Cooperative Behavior and the Frequency of Social Interaction," Levine's Working Paper Archive 122247000000000060, David K. Levine.
  3. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  4. Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August.
  5. Susan Athey & Kyle Bagwell & Chris Sanchirico, 2002. "Collusion and price rigidity," Discussion Papers 0102-38, Columbia University, Department of Economics.
  6. Feinberg, Robert M & Husted, Thomas A, 1993. "An Experimental Test of Discount-Rate Effects on Collusive Behaviour in Duopoly Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 153-60, June.
  7. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  8. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  9. Spagnolo, Giancarlo & Blonski, Matthias, 2001. "Prisoners' Other Dilemma," Working Paper Series in Economics and Finance 437, Stockholm School of Economics, revised 20 Feb 2001.
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Citations

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Cited by:
  1. Katerina Sherstyuk & Nori Tarui & Tatsuyoshi Saijo, 2013. "Payment schemes in infinite-horizon experimental games," Experimental Economics, Springer, vol. 16(1), pages 125-153, March.
  2. John Duffy & Felix Munoz-Garcia, 2009. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Working Papers 383, University of Pittsburgh, Department of Economics, revised May 2009.
  3. Tore Ellingsen & Benedikt Herrmann & Martin A. Nowak & David G. Rand & Corina E. Tarnita, 2012. "Civic Capital in Two Cultures: The Nature of Cooperation in Romania and USA," CESifo Working Paper Series 4042, CESifo Group Munich.
  4. Wu, Steven Y., 2013. "Adapting Contract Theory to Fit Contract Farming," 2014 Allied Social Science Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161894, Agricultural and Applied Economics Association.
  5. James Malcomson, 2010. "Relational Incentive Contracts," Economics Series Working Papers 508, University of Oxford, Department of Economics.
  6. Drew Fudenberg & David G. Rand & Anna Dreber, 2012. "Slow to Anger and Fast to Forgive: Cooperation in an Uncertain World," American Economic Review, American Economic Association, vol. 102(2), pages 720-49, April.
  7. Embrey Matthew & Mengel Friederike & Peeters Ronald, 2012. "Strategic commitment and cooperation in experimental games of strategic complements and substitutes," Research Memorandum 052, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  8. Timothy N. Cason & Sau-Him Paul Lau & Vai-Lam Mui, 2011. "Learning, Teaching, and Turn Taking in the Repeated Assignment Game," Purdue University Economics Working Papers 1267, Purdue University, Department of Economics.
  9. Mantilla, Cesar, 2014. "Are we more wearful than greedy? Outbounding the incentives to defect in cooperation dilemmas," IAST Working Papers 14-08, Institute for Advanced Study in Toulouse (IAST).
  10. Gabriele Camera & Marco Casari & Maria Bigoni, 2010. "Cooperative Strategies in Groups of Strangers: An Experiment," Purdue University Economics Working Papers 1237, Purdue University, Department of Economics.
  11. Camera, Gabriele & Casari, Marco & Bigoni, Maria, 2012. "Cooperative strategies in anonymous economies: An experiment," Games and Economic Behavior, Elsevier, vol. 75(2), pages 570-586.
  12. Breitmoser, Yves, 2012. "Cooperation, but no reciprocity: Individual strategies in the repeated Prisoner's Dilemma," MPRA Paper 41731, University Library of Munich, Germany.

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