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The impact of the termination rule on cooperation in a prisoner's dilemma experiment

  • Normann, Hans-Theo
  • Wallace, Brian

Cooperation in prisoner's dilemma games can usually be sustained only if the game has an infinite horizon. We analyze to what extent the theoretically crucial distinction of finite vs. infinite-horizon games is reflected in the outcomes of a prisoner's dilemma experiment. We compare three different experimental termination rules in four treatments: a known finite end, an unknown end, and two variants with a random termination rule (with a high and with a low continuation probability, where cooperation can occur in a subgame-perfect equilibrium only with the high probability). We find that the termination rules do not significantly affect average cooperation rates. Specifically, employing a random termination rule does not cause significantly more cooperation compared to a known finite horizon, and the continuation probability does not significantly affect average cooperation rates either. However, the termination rules may influence cooperation over time and end-game behavior. Further, the (expected) length of the game significantly increases cooperation rates. The results suggest that subjects may need at least some learning opportunities (like repetitions of the supergame) before significant backward induction arguments in finitely repeated game have force.

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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 19.

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Date of creation: 2011
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Handle: RePEc:zbw:dicedp:19
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  1. Henrik Orzen, 2006. "Counterintuitive Number Effects in Experimental Oligopolies," Discussion Papers 2006-22, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  2. Reinhard Selten & Michael Mitzkewitz & Gerald R. Uhlich, 1997. "Duopoly Strategies Programmed by Experienced Players," Econometrica, Econometric Society, vol. 65(3), pages 517-556, May.
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  12. Andreoni, James A & Miller, John H, 1993. "Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence," Economic Journal, Royal Economic Society, vol. 103(418), pages 570-85, May.
  13. Engle-Warnick, Jim & Slonim, Robert L., 2004. "The evolution of strategies in a repeated trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 553-573, December.
  14. Vera Angelova & Lisa V. Bruttel & Werner Güth & Ulrich Kamecke, 2013. "Can Subgame Perfect Equilibrium Threats Foster Cooperation? An Experimental Test Of Finite-Horizon Folk Theorems," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1345-1356, 04.
  15. Lisa Bruttel & Werner Güth & Ulrich Kamecke, 2012. "Finitely repeated prisoners’ dilemma experiments without a commonly known end," International Journal of Game Theory, Springer, vol. 41(1), pages 23-47, February.
  16. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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  18. Stahl, Dale II, 1991. "The graph of Prisoners' Dilemma supergame payoffs as a function of the discount factor," Games and Economic Behavior, Elsevier, vol. 3(3), pages 368-384, August.
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