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Punishment strategies in repeated games: Evidence from experimental markets

  • Wright, Julian

An experiment is designed to provide a snapshot of the strategies used by players in a repeated price competition game with a random continuation rule. One hundred pairs of subjects played the game over the Internet, with subjects having a few days to make their decisions in each round. Occasionally subjects are asked to enter one-period-ahead pricing strategies instead of prices. According to the elicited strategies, between 90% and 95% of subjects punish less harshly (in their initial response to a deviation) than implied by the grim trigger strategy, and do so in a way that depends on the size of the other subjectʼs deviation. Future earnings are highest for subjects adopting the tit-for-tat strategy, even after controlling for a subjectʼs past earnings. Punishment strategies are generally softer and more graduated than implied by a grim trigger strategy, and do better as a result.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 82 (2013)
Issue (Month): C ()
Pages: 91-102

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Handle: RePEc:eee:gamebe:v:82:y:2013:i:c:p:91-102
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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