Equilibrium cooperation in two-stage games: Experimental evidence

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Equilibrium cooperation in two-stage games: Experimental evidence

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Douglas D. Davis () (Department of Economics, Virginia Commonwealth University, 1015 Floyd Ave., P.O. Box 84-4000, Richmond, VA 23284-4000, USA)
Charles A. Holt () (Department of Economics, University of Virginia, Charlottesville, VA 22903, USA)

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Abstract

This paper reports results of an experiment design ed to investigate the nature of cooperation and punishment. Subjects are matched in a series of two-person, two-stage games with a sequential equilibrium that supports first-stage cooperation with a credible threat of subsequent punishment. Participants sometimes used a consistent punish/reward strategy, and when they did, cooperation rates increased dramatically. The results thus contradict "payoff relevance": second-stage behavior can be influenced by first-stage outcomes that have no effect on the payoff structure. Nevertheless, high cooperation rates were often not observed, even with a Pareto undominated "punishment" equilibrium in the second stage.

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Publisher Info
Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 28 (1999)
Issue (Month): 1 ()
Pages: 89-109
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Handle: RePEc:spr:jogath:v:28:y:1999:i:1:p:89-109

Note: received helpful suggestions from Ronald Harstad, Robert Reilly, Roger Sherman, Barry Sopher, from seminar participants at the Universities of Arizona, Pittsburgh and Iowa, and from an anonymous referee. This research was supported by grants from the National Science Foundation (SBR 93-19842 and SBR 93-20044). The data and experiment instructions are available at FTP address fido.econlab.arizona.edu.--> Douglas D. Davis (1), Charles A. Holt (2) Received: November 1993/final version: July 1995
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Manel Baucells & Steven A. Lippman, 2003. "Legal Hold-up in Cotenancy," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
Andersson , Ola & Wengström, Erik, 2007. "Communication and Renegotiation in Two-stage Games," Working Papers 2007:4, Lund University, Department of Economics. [Downloadable!]

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