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It's My Turn ... Please, After You: An Experimental Study of Cooperation and Social Conventions

Author

Listed:
  • Todd Kaplan

    (University of Exeter)

  • Bradley Ruffle

    (Ben- Gurion University)

Abstract

We introduce a class of two-player cooperation games where each player faces a binary decision, enter or exit. These games have a unique Nash equilibrium of entry. However, entry imposes a large enough negative externality on the other player such that the unique social optimum involves the player with the higher value to entry entering and the other player exiting. When the game is repeated and players' values to entry are private, cooperation admits the form of either taking turns entering or using a cutoff strategy and entering only for high private values of entry. Even with conditions that provide opportunities for unnoticed or non-punishable 'cheating', our empirical analysis including a simple strategy inference technique reveals that the Nash-equilibrium strategy is never the modal choice. In fact, most subjects employ the socially optimal symmetric cutoff strategy. These games capture the nature of cooperation in many economic and social situations such as bidding rings in auctions, competition for market share, labor supply decisions in the face of excess supply, queuing in line and courtship.

Suggested Citation

  • Todd Kaplan & Bradley Ruffle, 2004. "It's My Turn ... Please, After You: An Experimental Study of Cooperation and Social Conventions," Experimental 0410001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpex:0410001
    Note: Type of Document - pdf; pages: 37
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    References listed on IDEAS

    as
    1. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-272, March.
    2. Andreoni, James & Croson, Rachel, 2008. "Partners versus Strangers: Random Rematching in Public Goods Experiments," Handbook of Experimental Economics Results, Elsevier.
    3. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-599, June.
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    4. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
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    11. Jim Engle-Warnick & Bradley Ruffle, 2006. "The Strategies Behind Their Actions: A Method To Infer Repeated-Game Strategies And An Application To Buyer Behavior," Departmental Working Papers 2005-04, McGill University, Department of Economics.
    12. Eyal Winter & Amnon Rapoport & Darryl A. Seale, 2000. "An experimental study of coordination and learning in iterated two-market entry games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 661-687.
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    More about this item

    Keywords

    cooperation; incomplete information; random payoffs; strategy inference; experimental economics.;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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