Sequential Reciprocity in Two-Player, Two-Stages Games: An Experimental Analysis

Abstract

We experimentally test Dufwenberg and Kirchsteiger's (2004) theory of sequential reciprocity in a sequential prisoner's dilemma (SPD) and a mini-ultimatum game (MUG). Data on behavior and first- and second-order beliefs allow us to classify each subject's behavior as a material best response, a reciprocity best response, both, or none. We found that in both games the behavior of about 80% of the first-movers was a material best response, a reciprocity best response, or both. The remaining 20% of first-movers almost always made choices that were "too kind" according to the theory of reciprocity. Second-mover behavior, in both games, was fully in line with the predictions of the theory. The average behavior and beliefs across subjects were compatible with a sequential reciprocity equilibrium in the SPD but not in the MUG. We also found first- and second-order beliefs to be unbiased in the SPD and nearly unbiased in the MUG.

Keywords: sequential reciprocity

JEL Classification: A13, C70, C92, D63