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When best-replies are not in equilibrium: understanding cooperative behaviour

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  • Irenaeus Wolff

Abstract

To understand cooperative behaviour in social-dilemma experiments, we need to understand the game participants play not only in monetary but in preference terms. Does a Nash-prediction based on participants' actual preferences describe their behaviour in a public-good experiment well? And if not, where does the observed behaviour diverge from the prediction? This study provides an environment which allows to answer these questions: when making their contribution decision, participants are informed about their co-playersÕ priorly-elicited conditional contribution preferences. This induces common knowledge of preferences and thereby leads to direct experimental control over the game participants play. Results show that most people play best-responses to their beliefs. At the same time, beliefs in a third of the cases do not correspond to an equilibrium prediction that is based on the elicited conditional-cooperation preferences. Moreover, more often than not, beliefs are empirically inaccurate. This holds true even in a treatment that gives participants the option to look up the set of equilibria of their game.

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Bibliographic Info

Paper provided by Thurgauer Wirtschaftsinstitut, Universität Konstanz in its series TWI Research Paper Series with number 88.

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Date of creation: 2013
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Handle: RePEc:twi:respas:0088

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Keywords: Public good; social dilemma; Nash-equilibrium; rational beliefs; conditional cooperation; social preferences.;

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  1. Nicklisch, Andreas & Wolff, Irenaeus, 2012. "On the nature of reciprocity: Evidence from the ultimatum reciprocity measure," Journal of Economic Behavior & Organization, Elsevier, vol. 84(3), pages 892-905.
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