Reciprocity with Uncertainty About Others

56 Pages Posted: 20 Sep 2021 Last revised: 23 Sep 2021

See all articles by Wenhao Wu

Wenhao Wu

School of Entrepreneurship and Management, ShanghaiTech University

Jin-yeong Sohn

Dongbei University of Finance and Economics - Institute for Advanced Economic Research

Date Written: September 18, 2021

Abstract

We introduce the uncertainty of psychological motivation into a reciprocity model and explore its implications on behavior. We extend the Sequential Reciprocity Equilibrium in extensive-form games (Dufwenberg and Kirchsteiger, 2004) to a broader class of incomplete information games. We use this general framework to study many well-known games. We investigate how uncertainty changes the equilibrium predictions of the standard reciprocity model and compare two setups in which the psychological motivations are known and unknown among the players, respectively. We find that, in the prisoners’ dilemma, players are more likely to cooperate with each other when they have information about the reciprocal motivations of their opponents, given that the benefits of defection are modest.

Keywords: Social Preferences, Reciprocity, Incomplete Information, Prisoners’ Dilemma

JEL Classification: A13, D63, D81, D91

Suggested Citation

Wu, Wenhao and Sohn, Jin-yeong, Reciprocity with Uncertainty About Others (September 18, 2021). ShanghaiTech SEM Working Paper No. 2021-009, Available at SSRN: https://ssrn.com/abstract=3926177 or http://dx.doi.org/10.2139/ssrn.3926177

Wenhao Wu

School of Entrepreneurship and Management, ShanghaiTech University ( email )

393 Middle Huaxia Road, Pudong
Shanghai, 201210
China

Jin-yeong Sohn (Contact Author)

Dongbei University of Finance and Economics - Institute for Advanced Economic Research ( email )

217 Jianshan Street
Dalian, Liaoning 116025
China

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