Cooperation in Indefinitely Repeated Games of Strategic Complements and Substitutes

Ayse Gül Mermer, Wieland Müller, Sigrid Suetens

Publications: Working paper

Abstract

We report on experiments conducted to study the effect of strategic substitutability and strategic complementarity on the extent of cooperative behavior in indefinitely repeated two-player games. On average, choices in our experiment do not differ between the strategic complements and substitutes treatments. However, the aggregate data mask two countervailing effects. First, the percentage of joint-payoff maximizing choices is significantly higher under strategic substitutes than under strategic complements. We argue that this difference is driven by the fact that it is less risky to cooperate under substitutes than under complements. Second, choices of subjects in pairs that do not succeed in cooperating at the joint-payoff maximum tend to be lower (i.e. are less cooperative) under strategic substitutes than under strategic complements. We relate the latter result to non-equilibrium forces stemming from a ombination of heterogeneity of subjects and differences in the slope of the response function between substitutes and complements.
Original languageEnglish
Number of pages44
Publication statusPublished - 30 May 2016

Publication series

SeriesVienna Economics Papers
NumberNo.1603

Austrian Fields of Science 2012

  • 502047 Economic theory
  • 502013 Industrial economics
  • 502045 Behavioural economics

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