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Negotiating Cooperation Under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions

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  • Fabian Dvorak
  • Sebastian Fehrler

Abstract

Case studies of cartels and recent theory suggest that repeated communication is key for stable cooperation in environments where signals about others’ actions are noisy. However, empirically the exact role of communication is not well understood. We study cooperation under different monitoring and communication structures in the laboratory. Under all monitoring structures – perfect, imperfect public, and imperfect private – communication boosts efficiency. However, under imperfect monitoring, where actions can only be observed with noise, cooperation is stable only when subjects can communicate before every round of the game. Beyond improving coordination, communication increases efficiency by making subjects’ play more lenient and forgiving. We further find clear evidence for the exchange of private information – the central role ascribed to communication in recent theoretical contributions.

Suggested Citation

  • Fabian Dvorak & Sebastian Fehrler, 2018. "Negotiating Cooperation Under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions," TWI Research Paper Series 112, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    • Handle: RePEc:twi:respas:0112
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    Cited by:

    1. Fabian Dvorak, 2020. "stratEst: Strategy Estimation in R," TWI Research Paper Series 119, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    2. Bigoni, Maria & Casari, Marco & , & , & Spagnolo, Giancarlo, 2022. "It's Payback time: new insights on cooperation in the repeated prisoners' dilemma," CEPR Discussion Papers 16912, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    infinitely repeated games; monitoring; communication; cooperation; strategic uncertainty; prisoner’s dilemma;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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