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Patience or Fairness? Analyzing Social Preferences in Repeated Games

  • John Duffy
  • Felix Munoz-Garcia

This paper investigates how the introduction of social preferences affects players` equilibrium behavior in both one-shot and infinitely repeated versions of the Prisoner`s Dilemma game. We first show that defection survives as the unique equilibrium of the stage game if at least one player is not too concerned about inequity aversion. Second, we demonstrate that in the infinitely repeated version of the game, fairness concerns operate as a `substitute` for time discounting, as fairness helps sustain cooperation for lower discount factors. We then extend our results to more general simultaneous-move games, and more general preferences. Finally, we point out the implications of our findings for the design and analysis of experiments involving repeated games. In particular, repeated game equilibria which are thought to be supported by sufficiently large discount factors, may in fact be sustained by a combination of discounting and social preference parameters, an observation that may help rationalize recent experimental findings.

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Paper provided by University of Pittsburgh, Department of Economics in its series Working Papers with number 383.

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Date of creation: May 2009
Date of revision: May 2009
Handle: RePEc:pit:wpaper:383
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  25. John Duffy & Felix Munoz-Garcia, 2010. "Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences," Working Papers 2010-19, School of Economic Sciences, Washington State University.
  26. Yuichi Yamamoto, 2010. "The use of public randomization in discounted repeated games," International Journal of Game Theory, Springer, vol. 39(3), pages 431-443, July.
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