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Optimization incentives in dilemma games with strategic complementarity

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  • Suetens, Sigrid
  • Potters, Jan

Abstract

We examine whether optimization incentives --- incentives to best-respond --- have an effect on behavior in finitely repeated two-player dilemma games with strategic complements. We run an experiment in which we increase optimization incentives in two different ways compared to a baseline treatment. In the first treatment, the increase in optimization incentives is created by an increase in payoffs on the best-response curve, while its slope remains unchanged. In the second treatment, the increase in optimization incentives takes the form of an increase in the slope of the best-response curve, while best-response payoffs remain unchanged. We find that the impact of optimization incentives is overshadowed by the effect of the slope of the best-response curve. Although an increase in optimization incentives leads subjects to best-respond more frequently when the best-response curve is relatively flat, it leads to more cooperative behavior if it is accompanied by an increase in the slope of the best-response function.

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  • Suetens, Sigrid & Potters, Jan, 2020. "Optimization incentives in dilemma games with strategic complementarity," CEPR Discussion Papers 14595, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14595
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    More about this item

    Keywords

    Optimization incentives; Strategic complementarity; Repeated game; Cooperation; Experiments;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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