IDEAS home Printed from https://ideas.repec.org/a/kap/expeco/v16y2013i2p222-231.html
   My bibliography  Save this article

Finitely repeated games with social preferences

Author

Listed:
  • Jörg Oechssler

Abstract

A well-known result from the theory of finitely repeated games states that if the stage game has a unique equilibrium, then there is a unique subgame perfect equilibrium in the finitely repeated game in which the equilibrium of the stage game is being played in every period. Here I show that this result does in general not hold anymore if players have social preferences of the form frequently assumed in the recent literature, for example in the inequity aversion models of Fehr and Schmidt (Quartely Journal of Economics 114:817–868, 1999 ) or Bolton and Ockenfels (American Economic Review 100:166–193, 2000 ). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all. This finding should have relevance for all experiments with repeated interaction, whether with fixed, random or perfect stranger matching. Copyright Economic Science Association 2013

Suggested Citation

  • Jörg Oechssler, 2013. "Finitely repeated games with social preferences," Experimental Economics, Springer;Economic Science Association, vol. 16(2), pages 222-231, June.
    • Handle: RePEc:kap:expeco:v:16:y:2013:i:2:p:222-231
    DOI: 10.1007/s10683-012-9336-6
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10683-012-9336-6
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10683-012-9336-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    3. Balafoutas, Loukas & Kocher, Martin G. & Putterman, Louis & Sutter, Matthias, 2013. "Equality, equity and incentives: An experiment," European Economic Review, Elsevier, vol. 60(C), pages 32-51.
    4. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, May.
    5. Antonio Cabrales & Rosemarie Nagel & José Rodríguez Mora, 2012. "It is Hobbes, not Rousseau: an experiment on voting and redistribution," Experimental Economics, Springer;Economic Science Association, vol. 15(2), pages 278-308, June.
    6. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, vol. 3(1), pages 1-22, March.
    7. Matthias Sutter & Stefan Haigner & Martin G. Kocher, 2010. "Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1540-1566.
    8. David Masclet & Marie-Claire Villeval, 2008. "Punishment, inequality, and welfare: a public good experiment," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 31(3), pages 475-502, October.
    9. Sabrina Teyssier, 2008. "Experimental Evidence on Inequity Aversion and Self-Selection between Incentive Contracts," Post-Print halshs-00303727, HAL.
    10. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2001. "Stackelberg Beats Cournot: On Collusion and Efficiency in Experimental Markets," Economic Journal, Royal Economic Society, vol. 111(474), pages 749-765, October.
    11. Sergio Sousa, 2010. "Cooperation and Punishment under Uncertain Enforcement," Discussion Papers 2010-06, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    12. Rubinstein Ariel & Wolinsky Asher, 1995. "Remarks on Infinitely Repeated Extensive-Form Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 110-115, April.
    13. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    14. Fudenberg, Drew & Levine, David K., 2012. "Fairness, risk preferences and independence: Impossibility theorems," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 606-612.
    15. Matthew Rabin & Georg Weizsacker, 2009. "Narrow Bracketing and Dominated Choices," American Economic Review, American Economic Association, vol. 99(4), pages 1508-1543, September.
    16. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
    17. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
    18. Alain Cohn & Ernst Fehr & Benedikt Herrmann & Frédéric Schneider, 2011. "Social comparison in the workplace: evidence from a field experiment," ECON - Working Papers 007, Department of Economics - University of Zurich.
    19. Trautmann, Stefan T., 2009. "A tractable model of process fairness under risk," Journal of Economic Psychology, Elsevier, vol. 30(5), pages 803-813, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin G. Kocher & Fangfang Tan & Jing Yu, 2018. "Providing Global Public Goods: Electoral Delegation And Cooperation," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 381-397, January.
    2. Martin G. Kocher & Fangfang Tan & Jing Yu, 2018. "Providing Global Public Goods: Electoral Delegation And Cooperation," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 381-397, January.
    3. Lina Andersson, 2020. "Cooperation between Emotional Players," Games, MDPI, vol. 11(4), pages 1-16, October.
    4. Nikiforakis, Nikos & Oechssler, Jörg & Shah, Anwar, 2014. "Hierarchy, coercion, and exploitation: An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 155-168.
    5. Nikiforakis, Nikos & Oechssler, Jörg & Shah, Anwar, 2015. "Managerial bonuses, subordinates’ disobedience, and coercion," Working Papers 0589, University of Heidelberg, Department of Economics.
    6. Kingsley, David C., 2016. "Endowment heterogeneity and peer punishment in a public good experiment: Cooperation and normative conflict," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 60(C), pages 49-61.
    7. Lisa Bruttel & Werner Güth, 2018. "Asymmetric voluntary cooperation: a repeated sequential best-shot experiment," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(3), pages 873-891, September.
    8. Zhijian Wang & Yanran Zhou & Jaimie W. Lien & Jie Zheng & Bin Xu, 2016. "Extortion Can Outperform Generosity in the Iterated Prisoners' Dilemma," Levine's Bibliography 786969000000001297, UCLA Department of Economics.
    9. repec:cla:levarc:786969000000001297 is not listed on IDEAS
    10. Nikiforakis, Nikos & Oechssler, Jörg & Shah, Anwar, 2019. "Managerial bonuses and subordinate mistreatment," European Economic Review, Elsevier, vol. 119(C), pages 509-525.
    11. Lennart C. Johnsen & Abdolkarim Sadrieh & Guido Voigt, 2021. "Short‐term vs. Long‐term Contracting: Empirical Assessment of the Ratchet Effect in Supply Chain Interaction," Production and Operations Management, Production and Operations Management Society, vol. 30(7), pages 2252-2272, July.
    12. Sara Godoy & Miguel Meléndez-Jiménez & Antonio Morales, 2015. "No fight, no loss: underinvestment in experimental contest games," Economics of Governance, Springer, vol. 16(1), pages 53-72, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leibbrandt, Andreas & López-Pérez, Raúl & Spiegelman, Eli, 2023. "Reciprocal, but inequality averse as well? Mixed motives for punishment and reward," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 91-116.
    2. Luciano Andreozzi & Matteo Ploner & Ivan Soraperra, 2013. "Justice among strangers. On altruism, inequality aversion and fairness," CEEL Working Papers 1304, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    3. Müller, Stephan & Rau, Holger A., 2017. "Decisions under uncertainty in social contexts," University of Göttingen Working Papers in Economics 290, University of Goettingen, Department of Economics, revised 2017.
    4. Rau, Holger & Müller, Stephan, 2017. "Decisions under Uncertainty in Social Contexts," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168228, Verein für Socialpolitik / German Economic Association.
    5. Reuben, Ernesto & Riedl, Arno, 2013. "Enforcement of contribution norms in public good games with heterogeneous populations," Games and Economic Behavior, Elsevier, vol. 77(1), pages 122-137.
    6. Alexia Gaudeul, 2013. "Social preferences under uncertainty," Jena Economics Research Papers 2013-024, Friedrich-Schiller-University Jena.
    7. Müller, Stephan & Rau, Holger A., 2019. "Decisions under uncertainty in social contexts," Games and Economic Behavior, Elsevier, vol. 116(C), pages 73-95.
    8. Engel, Christoph, 2014. "Social preferences can make imperfect sanctions work: Evidence from a public good experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 343-353.
    9. Christoph Engel, 2013. "Deterrence by Imperfect Sanctions – A Public Good Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_09, Max Planck Institute for Research on Collective Goods.
    10. Grüner, Hans Peter & Engelmann, Dirk, 2013. "Tailored Bayesian Mechanisms: Experimental Evidence from Two-Stage Voting Games," CEPR Discussion Papers 9544, C.E.P.R. Discussion Papers.
    11. Barmettler, Franziska & Fehr, Ernst & Zehnder, Christian, 2012. "Big experimenter is watching you! Anonymity and prosocial behavior in the laboratory," Games and Economic Behavior, Elsevier, vol. 75(1), pages 17-34.
    12. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April.
    13. Grimalday, Gianluca & Karz, Anirban & Proto, Eugenio, 2012. "Everyone Wants a Chance: Initial Positions and Fairness in Ultimatum Games," CAGE Online Working Paper Series 93, Competitive Advantage in the Global Economy (CAGE).
    14. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    15. McEvoy, David M. & Cherry, Todd L. & Stranlund, John K., 2011. "The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence," Working Paper Series 102265, University of Massachusetts, Amherst, Department of Resource Economics.
    16. Astrid Gamba & Elena Manzoni & Luca Stanca, 2017. "Social comparison and risk taking behavior," Theory and Decision, Springer, vol. 82(2), pages 221-248, February.
    17. Bin Miao & Songfa Zhong, 2018. "Probabilistic social preference: how Machina’s Mom randomizes her choice," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(1), pages 1-24, January.
    18. Erik O. Kimbrough & Alexander Vostroknutov, 2016. "Norms Make Preferences Social," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 608-638, June.
    19. Engel, Christoph & Goerg, Sebastian J., 2018. "If the worst comes to the worst: Dictator giving when recipient’s endowments are risky," European Economic Review, Elsevier, vol. 105(C), pages 51-70.
    20. Guy Kaplanski & Haim Levy, 2017. "Envy and Altruism: Contrasting Bivariate and Univariate Prospect Preferences," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(2), pages 457-483, April.

    More about this item

    Keywords

    Social preferences; Finitely repeated games; Inequity aversion; ERC; C72; C73;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:expeco:v:16:y:2013:i:2:p:222-231. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.