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Extortion in the laboratory

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Listed:
  • Friedel Bolle
  • Yves Breitmoser
  • Steffen Schlächter

Abstract

In a laboratory experiment, we study a finitely repeated game (T=15) under complete information. In each round, P demands tribute (cash transfer) from A, A complies or refuses, and after refusals P may punish A. In equilibrium (payoff maximization), P does not punish and A refuses any positive demand. In the experiment, P punishes increasingly often and increasingly severely as she gains experience; most As comply with P's demands. The observations are compatible with linear spite. In a finite mixture model, the types of P and A in the subject pool are characterized. An A that is resistant to extortion (declines all demands) is very rare, and hence the threat of punishment in general is effective, but all As either ignore actual punishment or react negatively to it. They accept to pay tribute but they are resistant to piecemeal expropriation.

Suggested Citation

  • Friedel Bolle & Yves Breitmoser & Steffen Schlächter, 2011. "Extortion in the laboratory," Post-Print hal-00989521, HAL.
    • Handle: RePEc:hal:journl:hal-00989521
    DOI: 10.1016/j.jebo.2011.01.005
    Note: View the original document on HAL open archive server: https://hal.science/hal-00989521
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    3. 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.
    4. Calabuig, Vicente & Fatas, Enrique & Olcina, Gonzalo & Rodriguez-Lara, Ismael, 2016. "Carry a big stick, or no stick at all," Journal of Economic Psychology, Elsevier, vol. 57(C), pages 153-171.
    5. Chetan Dave & Sjur Hamre & Curtis Kephart & Alicja Reuben, 2020. "Subjects in the lab, activists in the field: public goods and punishment," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 533-553, September.
    6. Nikiforakis, Nikos & Oechssler, Jörg & Shah, Anwar, 2015. "Managerial bonuses, subordinates’ disobedience, and coercion," Working Papers 0589, University of Heidelberg, Department of Economics.
    7. De Chiara, Alessandro & Manna, Ester, 2022. "Corruption, regulation, and investment incentives," European Economic Review, Elsevier, vol. 142(C).

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    More about this item

    Keywords

    C72; C91; D74; laboratory experiment; mafia; extortion; punishment; finitely repeated game;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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