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Finitely repeated games with social preferences

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  • Jörg Oechssler

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Abstract

A well-known result from the theory of finitely repeated games states that if the stage game has a unique equilibrium, then there is a unique subgame perfect equilibrium in the finitely repeated game in which the equilibrium of the stage game is being played in every period. Here I show that this result does in general not hold anymore if players have social preferences of the form frequently assumed in the recent literature, for example in the inequity aversion models of Fehr and Schmidt (Quartely Journal of Economics 114:817–868, 1999 ) or Bolton and Ockenfels (American Economic Review 100:166–193, 2000 ). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all. This finding should have relevance for all experiments with repeated interaction, whether with fixed, random or perfect stranger matching. Copyright Economic Science Association 2013

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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 16 (2013)
Issue (Month): 2 (June)
Pages: 222-231

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Handle: RePEc:kap:expeco:v:16:y:2013:i:2:p:222-231

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Web page: http://www.springerlink.com/link.asp?id=102888

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Keywords: Social preferences; Finitely repeated games; Inequity aversion; ERC; C72; C73;

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Cited by:
  1. Kocher, Martin G. & Tan, Fangfang & Yu, Jing, 2014. "Providing global public goods: Electoral delegation and cooperation," Discussion Papers in Economics 21163, University of Munich, Department of Economics.
  2. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, Open Access Journal, MDPI, Open Access Journal, vol. 3(1), pages 56-77, March.
  3. Nikiforakis, Nikos & Oechssler, Jörg & Shah, Anwar, 2012. "Hierarchy, Coercion, and Exploitation: An Experimental Analysis," Working Papers 0530, University of Heidelberg, Department of Economics.
  4. Riedl, Arno & Rohde, Ingrid M.T. & Strobel, Martin, 2011. "Efficient Coordination in Weakest-Link Games," IZA Discussion Papers 6223, Institute for the Study of Labor (IZA).
  5. Gürtler, Marc & Gürtler, Oliver, 2012. "Inequality aversion and externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 111-117.

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