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Finitely repeated games with social preferences

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  • Oechssler, Jörg

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 (1999) or Bolton and Ockenfels (2000). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all.
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  • Oechssler, Jörg, 2011. "Finitely repeated games with social preferences," Working Papers 0512, University of Heidelberg, Department of Economics.
  • Handle: RePEc:awi:wpaper:0512
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    References listed on IDEAS

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    1. 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.
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    4. 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.
    5. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
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    15. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, Open Access Journal, vol. 3(1), pages 1-22, March.
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    Citations

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    Cited by:

    1. 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.
    2. Gürtler, Marc & Gürtler, Oliver, 2012. "Inequality aversion and externalities," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 111-117.
    3. Martin G. Kocher & Fanagfang Tan & Jing Yu, 2014. "Providing global public goods: Electoral delegation and cooperation," QuBE Working Papers 027, QUT Business School.
    4. 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.
    5. 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.
    6. repec:cla:levarc:786969000000001297 is not listed on IDEAS
    7. Arno Riedl & Ingrid M. T. Rohde & Martin Strobel, 2016. "Efficient Coordination in Weakest-Link Games," Review of Economic Studies, Oxford University Press, vol. 83(2), pages 737-767.
    8. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, Open Access Journal, vol. 3(1), pages 1-22, March.
    9. 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.
    10. Nikiforakis, Nikos & Oechssler, Jörg & Shah, Anwar, 2015. "Managerial bonuses, subordinates’ disobedience, and coercion," Working Papers 0589, University of Heidelberg, Department of Economics.

    More about this item

    Keywords

    social preferences; finitely repeated games; inequity aversion; ERC;

    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

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