Co-operation in the finitely repeated prisoner’s dilemma

Embrey, Matthew, Fréchette, Guillaume R and Yuksel, Sevgi (2017) Co-operation in the finitely repeated prisoner’s dilemma. The Quarterly Journal of Economics. ISSN 0033-5533

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Abstract

More than half a century after the first experiment on the finitely repeated prisoner’s dilemma, evidence on whether cooperation decreases with experience–as suggested by backward induction–remains inconclusive. This paper provides a meta-analysis of prior experimental research and reports the results of a new experiment to elucidate how cooperation varies with the environment in this canonical game. We describe forces that affect initial play (formation of cooperation) and unraveling (breakdown of cooperation). First, contrary to the backward induction prediction, the parameters of the repeated game have a significant effect on initial cooperation. We identify how these parameters impact the value of cooperation–as captured by the size of the basin of attraction of Always Defect–to account for an important part of this effect. Second, despite these initial differences, the evolution of behavior is consistent with the unraveling logic of backward induction for all parameter combinations. Importantly, despite the seemingly contradictory results across studies, this paper establishes a systematic pattern of behavior: subjects converge to use threshold strategies that conditionally cooperate until a threshold round; and conditional on establishing cooperation, the first defection round moves earlier with experience. Simulation results generated from a learning model estimated at the subject level provide insights into the long-term dynamics and the forces that slow down the unraveling of cooperation.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Depositing User: Joy Blake
Date Deposited: 13 Sep 2017 14:23
Last Modified: 13 Sep 2017 14:37
URI: http://sro.sussex.ac.uk/id/eprint/70185

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