Who Cooperates in Repeated Games?

Abstract:     
We explore the extent to which social preferences account for the observed heterogeneity in play in the repeated prisoner’s dilemma with noise. We find that giving in a post-experimental dictator game is correlated with cooperation in the repeated game when no cooperative equilibria exist, but not when cooperation is an equilibrium. Furthermore, none of the commonly observed strategies are explained by inequity aversion or efficiency concerns. Various survey questions provide additional evidence for relative unimportance of social preferences. We conclude that cooperation in repeated games is primarily motivated by long-term payoff maximization; some subjects may well have other goals but this does not seem to be of first order importance in this setting. In particular social preferences do not seem to be a major source of the observed diversity of play.

Number of Pages in PDF File: 53

Keywords: cooperation, prisoner’s dilemma, social preferences, dictator game, inequity aversion, survey

JEL Classification: C72, C91, D03

working papers series