Time Horizon and Cooperation in Continuous Time

Quaderni DSE Working Paper No. 796

42 Pages Posted: 17 Nov 2011

See all articles by Maria Bigoni

Maria Bigoni

University of Bologna - Department of Economics; IZA Institute of Labor Economics

Marco Casari

University of Bologna - Department of Economics

Andrzej Skrzypacz

Stanford University - Stanford Graduate School of Business

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Multiple version iconThere are 2 versions of this paper

Date Written: November 16, 2011

Abstract

When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of different time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We find that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic.

Moreover, a deterministic duration generates different aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end.

Keywords: folk theorem, prisoner's dilemma, backward induction, termination rule, innite horizon

JEL Classification: C72, C73, C91, C92, D74

Suggested Citation

Bigoni, Maria and Casari, Marco and Skrzypacz, Andrzej and Spagnolo, Giancarlo, Time Horizon and Cooperation in Continuous Time (November 16, 2011). Quaderni DSE Working Paper No. 796 . Available at SSRN: https://ssrn.com/abstract=1961025 or http://dx.doi.org/10.2139/ssrn.1961025

Maria Bigoni (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, Bologna 40126
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+390512098134 (Phone)

HOME PAGE: http://https://www.unibo.it/sitoweb/maria.bigoni/en

IZA Institute of Labor Economics ( email )

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Bonn, D-53072
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Marco Casari

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Andrzej Skrzypacz

Stanford University - Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
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650-725-9932 (Fax)

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

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