Do Multiple Contacts Matter?

Abstract

In this experimental article, the author investigates the impact of multiple contacts on collusive behavior in various strategic environments. Contrary to the theoretical expectations that collusion incentives would increase with multiple interactions, the study finds no significant increase in collusion in either symmetric or asymmetric environments. Instead, there is a notable increase in defection in all points of contact within the symmetric environment. Although overall collusion did not increase, the experiment revealed a change in the mechanism that sustains collusion, particularly in asymmetric payoff situations. Specifically, defection at one interaction point leads to a higher likelihood of future punishment at another point under multiple contacts. Additionally, the author adapts popular strategies to condition on the history observed across multiple interaction points and observes that subjects employed these modified strategies in the asymmetric environment. These effects of multiple contacts can be partially explained by the concept of risk dominance.

Keywords: Multiple Contacts, Multi-market Contact, Tacit Collusion, Cooperation, In-finitely Repeated Prisoners’ Dilemma, Asymmetry, Strategy Estimation

JEL Classification: C72, C73, C91