TY - JOUR
T1 - Collusion as public monitoring becomes noisy
T2 - Experimental evidence
AU - Aoyagi, Masaki
AU - Fréchette, Guillaume
N1 - Funding Information:
✩ This is a substantially revised version of Aoyagi and Fréchette [M. Aoyagi, G.R. Fréchette, Collusion as public monitoring becomes noisy: Experimental evidence, http://homepages.nyu.edu/~gf35/print/Aoyagi_2005a.pdf, 2005]. Special thanks are given to John Kagel, who helped with comments and guidance throughout the development of the paper. We have benefited from discussions with Al Roth and Marco Casari and comments by Pedro Dal Bó, Georg Weizsacker and seminar participants at Université Laval, Harvard University, Kyoto University, New York University, Université de Montréal, Carnegie Mellon University, RIETI, Rutgers, and the Stockholm School of Economics, participants of the 2003 International Meeting of the Economic Science Association, participants at the 14th Summer Festival on Game Theory at Stony Brook, two referees and the associate editor. Alex Brown provided valuable research assistance. We thank Jo Ducey, Matthew Embrey, Sotiris Georganas, John Lightle, Karen Manukyan, John-David Slaughter, and Yong Yu for help with the additional control sessions. This research was supported in part by the NSF via grants SES-0519045 and SES-0721111, by the Harvard Business School, by the Center for Experimental Social Science, by the C.V. Starr Center, and by the Zengin Foundation for Studies on Economics and Finance. * Corresponding author. E-mail addresses: [email protected] (M. Aoyagi), [email protected] (G. Fréchette).
PY - 2009/5
Y1 - 2009/5
N2 - This paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners' dilemma game with imperfect public monitoring. We find that subjects' payoffs (i) decrease as noise increases, and (ii) are lower than the theoretical maximum for low noise, but exceed it for high noise. Under the assumption that the subjects' strategy uses thresholds on the public signal for transition between cooperation and punishment states, we find that the best fitting strategy simply compares the most recent public signal against a single threshold.
AB - This paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners' dilemma game with imperfect public monitoring. We find that subjects' payoffs (i) decrease as noise increases, and (ii) are lower than the theoretical maximum for low noise, but exceed it for high noise. Under the assumption that the subjects' strategy uses thresholds on the public signal for transition between cooperation and punishment states, we find that the best fitting strategy simply compares the most recent public signal against a single threshold.
KW - Collusion
KW - Cooperation
KW - Imperfect public monitoring
KW - Repeated games
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U2 - 10.1016/j.jet.2008.10.005
DO - 10.1016/j.jet.2008.10.005
M3 - Article
AN - SCOPUS:64049115647
SN - 0022-0531
VL - 144
SP - 1135
EP - 1165
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 3
ER -