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Equilibrium cooperation in two-stage games: Experimental evidence

Listed author(s):
  • Douglas D. Davis


    (Department of Economics, Virginia Commonwealth University, 1015 Floyd Ave., P.O. Box 84-4000, Richmond, VA 23284-4000, USA)

  • Charles A. Holt


    (Department of Economics, University of Virginia, Charlottesville, VA 22903, USA)

This paper reports results of an experiment design ed to investigate the nature of cooperation and punishment. Subjects are matched in a series of two-person, two-stage games with a sequential equilibrium that supports first-stage cooperation with a credible threat of subsequent punishment. Participants sometimes used a consistent punish/reward strategy, and when they did, cooperation rates increased dramatically. The results thus contradict "payoff relevance": second-stage behavior can be influenced by first-stage outcomes that have no effect on the payoff structure. Nevertheless, high cooperation rates were often not observed, even with a Pareto undominated "punishment" equilibrium in the second stage.

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Article provided by Springer & Game Theory Society in its journal International Journal of Game Theory.

Volume (Year): 28 (1999)
Issue (Month): 1 ()
Pages: 89-109

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Handle: RePEc:spr:jogath:v:28:y:1999:i:1:p:89-109
Note: received helpful suggestions from Ronald Harstad, Robert Reilly, Roger Sherman, Barry Sopher, from seminar participants at the Universities of Arizona, Pittsburgh and Iowa, and from an anonymous referee. This research was supported by grants from the National Science Foundation (SBR 93-19842 and SBR 93-20044). The data and experiment instructions are available at FTP address> Douglas D. Davis (1), Charles A. Holt (2) Received: November 1993/final version: July 1995
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