Working Paper: CEPR ID: DP16912
Authors: Maria Bigoni; Marco Casari; Andrea Salvanti; Andrzej Skrzypacz; Giancarlo Spagnolo
Abstract: In an experiment on the repeated prisoner’s dilemma where intended actions are implemented with noise, Fudenberg et al. (2012) observe that non-equilibrium strategies of the “tit-for-tat” family are largely adopted. Furthermore, they do not find support for risk dominance of TFT as a determinant of cooperation. This comment introduces the “Payback” strategy, which is similar to TFT but is sustainable in equilibrium. Using the data from the original article, we show that Payback captures most of the empirical support previously attributed to TFT, and that the riskdominance criterion based on Payback can explain the observed cooperation patterns.
Keywords: asymmetric strategies; imperfect monitoring; indefinitely repeated games; risk dominance; strategic risk
JEL Codes: C72; C73; C91; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| payback strategy (L21) | higher cooperation rates (C71) |
| risk dominance based on payback strategy (C72) | cooperation levels (C71) |
| payback strategy (L21) | higher expected payoffs in cooperative scenarios (C71) |
| payback strategy (L21) | predictive power of risk dominance in noisy games (C72) |