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Patience or Fairness? Analyzing Social Preferences in Repeated Games

  • John Duffy
  • Felix Munoz-Garcia

    ()

    (School of Economic Sciences, Washington State University)

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. Furthermore, we examine how the introduction of incomplete information about players’ social preferences can help in the selection of the efficient cooperative outcome. 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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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Munoz/WP2009-12.pdf
File Function: First version, 2009
Download Restriction: no

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2009-12.

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Length: 27 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:wsu:wpaper:munoz-4
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Web page: http://faculty.ses.wsu.edu/

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  16. Brandts, Jordi & Figueras, Neus, 2003. "An exploration of reputation formation in experimental games," Journal of Economic Behavior & Organization, Elsevier, vol. 50(1), pages 89-115, January.
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  18. Anderhub, Vital & Engelmann, Dirk & Guth, Werner, 2002. "An experimental study of the repeated trust game with incomplete information," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 197-216, June.
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