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Behavioral Approach to Repeated Games with Private Monitoring

Author

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  • Hitoshi Matsushima

    (Faculty of Economics, University of Tokyo)

  • Tomomi Tanaka

    (Economic Development & Global Education, LLC)

  • Tomohisa Toyama

    (Faculty of Engineering, Kogakuin University)

Abstract

We examine repeated prisoners' dilemma with imperfect private monitoring and random termination where the termination probability is low. We run laboratory experiments and show subjects retaliate more severely when monitoring is more accurate. This experimental result contradicts the prediction of standard game theory. Instead of assuming full rationality and pure self-interest, we introduce naiveté and social preferences, i.e., reciprocal concerns, and develop a model that is consistent with, and uniquely predicts, the observed behavior in the experiments. Our behavioral model suggests there is a trade-off between naiveté and reciprocity. When people are concerned about reciprocity, they tend to make fewer random choices.

Suggested Citation

  • Hitoshi Matsushima & Tomomi Tanaka & Tomohisa Toyama, 2013. "Behavioral Approach to Repeated Games with Private Monitoring," CIRJE F-Series CIRJE-F-879, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2013cf879
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    References listed on IDEAS

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    Cited by:

    1. Yutaka Kayaba & Hitoshi Matsushima & Tomohisa Toyama, 2016. "Accuracy and Retaliation in Repeated Games with Imperfect Private Monitoring:Experiments and Theory," CIRJE F-Series CIRJE-F-1004, CIRJE, Faculty of Economics, University of Tokyo.
    2. repec:eee:jjieco:v:33:y:2014:i:c:p:96-113 is not listed on IDEAS
    3. Heller, Yuval, 2017. "Instability of belief-free equilibria," Journal of Economic Theory, Elsevier, vol. 168(C), pages 261-286.
    4. Yutaka Kayaba & Hitoshi Matsushima & Tomohisa Toyama, 2017. "Accuracy and Retaliation in Repeated Games with Imperfect Private Monitoring: Experiments and Theory (Revised version of F-381)," CARF F-Series CARF-F-414, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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