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Investing to Cooperate:Theory and Experiment

Author

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  • Jean-Pierre Benoît

    (London Business School (LBS))

  • Roberto Galbiati

    (Département d'économie (ECON))

  • Emeric Henry

    (Département d'économie)

Abstract

We study theoretically and in a lab-experiment investment decisions in environments where property rights are absent. In our setting a player chooses an investment level before interacting repeatedly with a given set of agents. The investment stochastically affects the payoffs of the game in every subsequent period. We show that investments with less volatile returns are more likely to be observed since they facilitate cooperation. We also show that the investor might be forced to invest more than he would in an environment with legal protection, to keep other players cooperative. Experimental results are broadly consistent with the theoretical findings.

Suggested Citation

  • Jean-Pierre Benoît & Roberto Galbiati & Emeric Henry, 2013. "Investing to Cooperate:Theory and Experiment," Sciences Po publications info:hdl:2441/d3pr45c1e8e, Sciences Po.
    • Handle: RePEc:spo:wpmain:info:hdl:2441/d3pr45c1e8egae1q88dc5jo6u
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    References listed on IDEAS

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    More about this item

    Keywords

    Investment; Experiments; Repeated games; Property rights;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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