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Investing to cooperate: Theory and experiment

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  • Benoît, Jean-Pierre
  • Galbiati, Roberto
  • Henry, Emeric

Abstract

We study theoretically and in a lab-experiment investment decisions in environments where property rights are absent. In our setting a player chooses an investment level before interacting repeatedly with a given set of agents. The investment stochastically affects the payoffs of the game in every subsequent period. We show that more volatile returns make investment more difficult in the absence of legal protection, and might force the investor to invest more to guarantee cooperation. Experimental results are broadly consistent with the theoretical findings.

Suggested Citation

  • Benoît, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2017. "Investing to cooperate: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 1-17.
  • Handle: RePEc:eee:jeborg:v:144:y:2017:i:c:p:1-17
    DOI: 10.1016/j.jebo.2017.09.011
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    References listed on IDEAS

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    More about this item

    Keywords

    Investment; Experiments; Repeated games; Property rights;

    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
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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