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Equilibrium cooperation in two-stage games: Experimental evidence


  • 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.

Suggested Citation

  • Douglas D. Davis & Charles A. Holt, 1999. "Equilibrium cooperation in two-stage games: Experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 28(1), pages 89-109.
  • 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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    References listed on IDEAS

    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. repec:cup:apsrev:v:83:y:1989:i:04:p:1181-1206_08 is not listed on IDEAS
    3. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
    4. Kramer, Gerald H., 1977. "A dynamical model of political equilibrium," Journal of Economic Theory, Elsevier, vol. 16(2), pages 310-334, December.
    5. Alos-Ferrer, Carlos & Ania, Ana B., 2001. "Local equilibria in economic games," Economics Letters, Elsevier, vol. 70(2), pages 165-173, February.
    6. Jean-FranÚois Laslier, 2000. "Interpretation of electoral mixed strategies," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 17(2), pages 283-292.
    7. Raquel Fernandez & Richard Rogerson, 1995. "On the Political Economy of Education Subsidies," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 249-262.
    8. repec:cup:apsrev:v:90:y:1996:i:02:p:316-330_20 is not listed on IDEAS
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    Cited by:

    1. Gagen, Michael, 2013. "Isomorphic Strategy Spaces in Game Theory," MPRA Paper 46176, University Library of Munich, Germany.
    2. Andersson, Ola & Wengström, Erik, 2012. "Credible communication and cooperation: Experimental evidence from multi-stage Games," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 207-219.
    3. Andersson, Ola & Wengström, Erik, 2007. "More Communication, Less Cooperation: Experimental Evidence from Multi-stage Games," Working Papers 2007:4, Lund University, Department of Economics, revised 24 Nov 2010.


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