TY - JOUR
T1 - Infinitely repeated games in the laboratory
T2 - four perspectives on discounting and random termination
AU - Fréchette, Guillaume R.
AU - Yuksel, Sevgi
N1 - Publisher Copyright:
© 2016, Economic Science Association.
PY - 2017/6/1
Y1 - 2017/6/1
N2 - This paper compares behavior under four different implementations of infinitely repeated games in the laboratory: the standard random termination method [proposed by Roth and Murnighan (J Math Psychol 17:189–198, 1978)] and three other methods that de-couple the expected number of rounds and the discount factor. Two of these methods involve a fixed number of repetitions with payoff discounting, followed by random termination [proposed by Sabater-Grande and Georgantzis (J Econ Behav Organ 48:37–50, 2002)] or followed by a coordination game [proposed in (Andersson and Wengström in J Econ Behav Organ 81:207–219, 2012; Cooper and Kuhn in Am Econ J Microecon 6:247–278, 2014a)]. We also propose a new method—block random termination—in which subjects receive feedback about termination in blocks of rounds. We find that behavior is consistent with the presence of dynamic incentives only with methods using random termination, with the standard method generating the highest level of cooperation. Subject behavior in the other two methods display two features: a higher level of stability in cooperation rates and less dependence on past experience. Estimates of the strategies used by subjects reveal that across implementations, even when the discount rate is the same, if interactions are expected to be longer defection increases and the use of the Grim strategy decreases.
AB - This paper compares behavior under four different implementations of infinitely repeated games in the laboratory: the standard random termination method [proposed by Roth and Murnighan (J Math Psychol 17:189–198, 1978)] and three other methods that de-couple the expected number of rounds and the discount factor. Two of these methods involve a fixed number of repetitions with payoff discounting, followed by random termination [proposed by Sabater-Grande and Georgantzis (J Econ Behav Organ 48:37–50, 2002)] or followed by a coordination game [proposed in (Andersson and Wengström in J Econ Behav Organ 81:207–219, 2012; Cooper and Kuhn in Am Econ J Microecon 6:247–278, 2014a)]. We also propose a new method—block random termination—in which subjects receive feedback about termination in blocks of rounds. We find that behavior is consistent with the presence of dynamic incentives only with methods using random termination, with the standard method generating the highest level of cooperation. Subject behavior in the other two methods display two features: a higher level of stability in cooperation rates and less dependence on past experience. Estimates of the strategies used by subjects reveal that across implementations, even when the discount rate is the same, if interactions are expected to be longer defection increases and the use of the Grim strategy decreases.
KW - Discounting
KW - Infinitely repeated games
KW - Prisoner’s dilemma
KW - Random termination
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U2 - 10.1007/s10683-016-9494-z
DO - 10.1007/s10683-016-9494-z
M3 - Article
AN - SCOPUS:84991782142
SN - 1386-4157
VL - 20
SP - 279
EP - 308
JO - Experimental Economics
JF - Experimental Economics
IS - 2
ER -