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It's My Turn . . . Please, After You: An Experimental Study of Cooperation and Social Conventions

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  • Todd R. Kaplan

    (Department of Economics, University of Exeter)

  • Bradley J. Ruffle

    (Ben-Gurion University)

Abstract

We introduce a class of two-player cooperation games where each player faces a binary decision, enter or exit. These games have a unique Nash equilibrium of entry. However, entry imposes a large enough negative externality on the other player such that the unique social optimum involves the player with the higher value to entry entering and the other player exiting. When the game is repeated and players' values to entry are private, cooperation admits the form of either taking turns entering or using a cuto? strategy and entering only for high private values of entry. Even with conditions that provide opportunities for unnoticed or non-punishable “cheating”, our empirical analysis including a simple strategy inference technique reveals that the Nash-equilibrium strategy is never the modal choice. In fact, most subjects employ the socially optimal symmetric cuto? strategy. These games capture the nature of cooperation in many economic and social situations such as bidding rings in auctions, competition for market share, labor supply decisions in the face of excess supply, queuing in line and courtship.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0403.pdf
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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0403.

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Date of creation: Aug 2004
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Handle: RePEc:exe:wpaper:0403

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Keywords: cooperation; incomplete information; random payoffs; strategy inference; experimental economics.;

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  1. Professor Paul Klemperer, 2000. "What Really Matters in Auction Design," Microeconomics 0004008, EconWPA.
  2. Ernst Fehr & Simon Gaechter, . "Cooperation and Punishment in Public Goods Experiments," IEW - Working Papers 010, Institute for Empirical Research in Economics - University of Zurich.
  3. Jim Engle-Warnick & Bradley Ruffle, 2006. "The Strategies Behind Their Actions: A Method To Infer Repeated-Game Strategies And An Application To Buyer Behavior," Departmental Working Papers 2005-04, McGill University, Department of Economics.
  4. Peter Cramton & Jesse Schwartz, 2002. "Collusive Bidding in the FCC Spectrum Auctions," Papers of Peter Cramton 02collude, University of Maryland, Department of Economics - Peter Cramton, revised 04 Dec 2002.
  5. Rapoport, Amnon & Seale, Darryl A. & Winter, Eyal, 2002. "Coordination and Learning Behavior in Large Groups with Asymmetric Players," Games and Economic Behavior, Elsevier, vol. 39(1), pages 111-136, April.
  6. Timothy Cason & Tatsuyoshi Saijo & Takehiko Yamato, 2002. "Voluntary Participation and Spite in Public Good Provision Experiments: An International Comparison," Experimental Economics, Springer, vol. 5(2), pages 133-153, October.
  7. McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  9. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  10. Eyal Winter & Amnon Rapoport & Darryl A. Seale, 2000. "An experimental study of coordination and learning in iterated two-market entry games," Economic Theory, Springer, vol. 16(3), pages 661-687.
  11. Arthur, W Brian, 1994. "Inductive Reasoning and Bounded Rationality," American Economic Review, American Economic Association, vol. 84(2), pages 406-11, May.
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