Can Subgame Perfect Equilibrium Threats Foster Cooperation? An Experimental Test of Finite‐Horizon Folk Theorems

12 Pages Posted: 27 Feb 2013

See all articles by Vera Angelova

Vera Angelova

Technische Universität Berlin (TU Berlin)

Lisa Bruttel

Humboldt University of Berlin

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Ulrich Kamecke

Humboldt University of Berlin - Faculty of Economics

Date Written: April 2013

Abstract

This paper considers extended prisoners' dilemma games in which a second pure strategy equilibrium in the stage game allows for mutual cooperation in all but the last round of the finitely repeated game as an equilibrium outcome. We distinguish a strict and a weak extension of the prisoners' dilemma game in a long and a short horizon treatment. A comparison with the corresponding finitely repeated prisoners' dilemma games shows that the strict additional equilibrium increases cooperation rates while the weak does not. This result is robust to the variation of the time horizon.

JEL Classification: C73, C91

Suggested Citation

Angelova, Vera and Bruttel, Lisa and Güth, Werner and Kamecke, Ulrich, Can Subgame Perfect Equilibrium Threats Foster Cooperation? An Experimental Test of Finite‐Horizon Folk Theorems (April 2013). Economic Inquiry, Vol. 51, Issue 2, pp. 1345-1356, 2013. Available at SSRN: https://ssrn.com/abstract=2225674 or http://dx.doi.org/10.1111/j.1465-7295.2011.00421.x

Vera Angelova (Contact Author)

Technische Universität Berlin (TU Berlin)

Straße des 17
Juni 135
Berlin, 10623
Germany

Lisa Bruttel

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Werner Güth

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Ulrich Kamecke

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
D-10178 Berlin
Germany
(49)-(30)-2093 5785 (Phone)
(49)-(39)-2093 5787 (Fax)

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