Behavioral Approach to Repeated Games with Private Monitoring
AbstractWe examine repeated prisoners' dilemma with imperfect private monitoring and random termination where the termination probability is low. We run laboratory experiments and show subjects retaliate more severely when monitoring is more accurate. This experimental result contradicts the prediction of standard game theory. Instead of assuming full rationality and pure self-interest, we introduce naivetÃ© and social preferences, i.e., reciprocal concerns, and develop a model that is consistent with, and uniquely predicts, the observed behavior in the experiments. Our behavioral model suggests there is a trade-off between naivetÃ© and reciprocity. When people are concerned about reciprocity, they tend to make fewer random choices.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-879.
Length: 49 pages
Date of creation: Mar 2013
Date of revision:
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Other versions of this item:
- Hitoshi Matsushima & Tomomi Tanaka & Tomohisa Toyama, 2013. "Behavioral Approach to Repeated Games with Private Monitoring," CARF F-Series CARF-F-309, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- NEP-ALL-2013-04-20 (All new papers)
- NEP-CBE-2013-04-20 (Cognitive & Behavioural Economics)
- NEP-CTA-2013-04-20 (Contract Theory & Applications)
- NEP-EVO-2013-04-20 (Evolutionary Economics)
- NEP-EXP-2013-04-20 (Experimental Economics)
- NEP-GTH-2013-04-20 (Game Theory)
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