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Patience or Fairness? Analyzing Social Preferences in Repeated Games

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  • John Duffy
  • Felix Munoz-Garcia

    ()
    (School of Economic Sciences, Washington State University)

Abstract

This paper investigates how the introduction of social preferences affects players’ equilibrium behavior in both one-shot and infinitely repeated versions of the Prisoner’s Dilemma game. We first show that defection survives as the unique equilibrium of the stage game if at least one player is not too concerned about inequity aversion. Second, we demonstrate that in the infinitely repeated version of the game, fairness concerns operate as a “substitute: for time discounting, as fairness helps sustain cooperation for lower discount factors. We then extend our results to more general simultaneous-move games, and more general preferences. Furthermore, we examine how the introduction of incomplete information about players’ social preferences can help in the selection of the efficient cooperative outcome. Finally, we point out the implications of our findings for the design and analysis of experiments involving repeated games. In particular, repeated game equilibria which are thought to be supported by sufficiently large discount factors, may in fact be sustained by a combination of discounting and social preference parameters, an observation that may help rationalize recent experimental findings.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Munoz/WP2009-12.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2009-12.

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Length: 27 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:wsu:wpaper:munoz-4

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Related research

Keywords: Prisoner’s dilemma; Repeated games; Inequity aversion; Time discounting; Time discounting; Social Preferences;

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References

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  3. Anderhub, Vital & Güth, Werner & Engelmann, Dirk, 1999. "An experimental study of the repeated trust game with incomplete information," SFB 373 Discussion Papers 1999,97, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. Oechssler, Jörg, 2011. "Finitely repeated games with social preferences," Working Papers 0515, University of Heidelberg, Department of Economics.
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  32. Matthias Blonski & Peter Ockenfels & Giancarlo Spagnolo, 2011. "Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 164-92, August.
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Citations

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Cited by:
  1. Oechssler, Jörg, 2011. "Finitely repeated games with social preferences," Working Papers 0515, University of Heidelberg, Department of Economics.
  2. John Duffy & Felix Munoz-Garcia, 2010. "Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences," Working Papers 2010-19, School of Economic Sciences, Washington State University.
  3. 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.
  4. John Duffy & Felix Munoz-Garcia, 2012. "Cooperation and Signaling with Uncertain Social Preferences," Working Papers 491, University of Pittsburgh, Department of Economics, revised May 2013.

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