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Cooperation as self-interested reciprocity in the Centipede

  • Farina, Francesco
  • Sbriglia, Patrizia

Cooperation is a pervasive social phenomenon but more often than not economic theories have little to say about its causes and consequences. In this paper, we explore the hypothesis that cooperative behaviour might be motivated by purely selfish interest when the “social” payoff in a game is increasing. We report the results of a series of experiments on the centipede game. The experiments are organized in two subsequent steps. Subjects first participate in a 2-period trust game, randomly matched with unknown partners. We apply the strategy method in order to elicit their social preferences. On the basis of their pre-game behaviour, individuals are divided into three main social groups: selfish individuals, pure altruists and reciprocators. At the second step of the experiment, subjects play a repeated 6-move centipede game with increasing final payoff. Each subject plays twice in a low stake and in a high centipede game, and he/she is informed about his/her co-player social preferences. We identify the origin of cooperation within homogeneous and heterogeneous social groups.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3701.

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Date of creation: Feb 2007
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Handle: RePEc:pra:mprapa:3701
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  1. Fey, Mark & McKelvey, Richard D & Palfrey, Thomas R, 1996. "An Experimental Study of Constant-Sum Centipede Games," International Journal of Game Theory, Game Theory Society, vol. 25(3), pages 269-87.
  2. Abigail Barr & Jose Garcia-Montalvo & Magnus Lindelow & Pieter Serneels, 2005. "Strategy choice and cognitive ability in field experiments," Framed Field Experiments 00113, The Field Experiments Website.
  3. Simon Gächter & Christian Thöni, 2004. "Social learning and voluntary cooperation among like-minded people," University of St. Gallen Department of Economics working paper series 2004 2004-12, Department of Economics, University of St. Gallen.
  4. Roland Bénabou & Jean Tirole, 2006. "Incentives and Prosocial Behavior," Post-Print hal-00173700, HAL.
  5. Ponti, Giovanni, 2000. "Cycles of Learning in the Centipede Game," Games and Economic Behavior, Elsevier, vol. 30(1), pages 115-141, January.
  6. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
  7. Binmore, Ken, 1988. "Modeling Rational Players: Part II," Economics and Philosophy, Cambridge University Press, vol. 4(01), pages 9-55, April.
  8. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
  9. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
  10. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  11. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
  12. Aumann, Robert J., 1998. "On the Centipede Game," Games and Economic Behavior, Elsevier, vol. 23(1), pages 97-105, April.
  13. Guth, Werner & Huck, Steffen & Muller, Wieland, 2001. "The Relevance of Equal Splits in Ultimatum Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 161-169, October.
  14. Aumann, Robert J., 1995. "Backward induction and common knowledge of rationality," Games and Economic Behavior, Elsevier, vol. 8(1), pages 6-19.
  15. repec:hrv:faseco:4553005 is not listed on IDEAS
  16. Aumann, Robert J., 1996. "Reply to Binmore," Games and Economic Behavior, Elsevier, vol. 17(1), pages 138-146, November.
  17. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, vol. 60(4), pages 803-36, July.
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