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Cooperation in infinitely repeated games of strategic complements and substitutes

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  • Mermer, Ayşe Gül
  • Müller, Wieland
  • Suetens, Sigrid

Abstract

We report the results of an experiment conducted to study the effect of strategic substitutability and strategic complementarity on cooperation in infinitely repeated two-player games. We find that choices in the first rounds of the repeated games are significantly more cooperative under strategic substitutes than under strategic complements and that players are more likely to choose joint-payoff maximizing choices in the former than in the latter case. We argue that this effect is driven by the fact that it is less risky to cooperate under substitutes than under complements. We also find that choices do not remain more cooperative under strategic substitutes than under complements over the course of the rounds within the repeated games. We show that this is because best-reply dynamics come into the picture: players are more inclined to follow cooperative moves of the partner under complements, offsetting the treatment effect observed in the first rounds.

Suggested Citation

  • Mermer, Ayşe Gül & Müller, Wieland & Suetens, Sigrid, 2021. "Cooperation in infinitely repeated games of strategic complements and substitutes," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1191-1205.
    • Handle: RePEc:eee:jeborg:v:188:y:2021:i:c:p:1191-1205
    DOI: 10.1016/j.jebo.2021.05.004
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    Cited by:

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    2. Cédric Argenton & Radosveta Ivanova-Stenzel & Wieland Müller, 2023. "Cournot Meets Bayes-Nash: A Discontinuity in Behavior in Finitely Repeated Duopoly Games," Rationality and Competition Discussion Paper Series 460, CRC TRR 190 Rationality and Competition.
    3. Argenton, Cédric & Ivanova-Stenzel, Radosveta & Müller, Wieland, 2022. "Cournot Meets Bayes-Nash: A Discontinuity in Behavior in Finitely Repeated Duopoly Games," VfS Annual Conference 2022 (Basel): Big Data in Economics 264079, Verein für Socialpolitik / German Economic Association.
    4. Nobuyuki Hanaki & Ali I. Ozkes, 2023. "Strategic environment effect and communication," Experimental Economics, Springer;Economic Science Association, vol. 26(3), pages 588-621, July.
    5. Miguel A. Fonseca & Yan Li & Hans‐Theo Normann, 2018. "Why factors facilitating collusion may not predict cartel occurrence — experimental evidence," Southern Economic Journal, John Wiley & Sons, vol. 85(1), pages 255-275, July.

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    More about this item

    Keywords

    Cooperation; Repeated games; Experimental economics; Strategic substitutes; Strategic complements;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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