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American Economic Review: Vol. 102 No. 1 (February 2012)

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A Continuous Dilemma

Article Citation

Friedman, Daniel, and Ryan Oprea. 2012. "A Continuous Dilemma." American Economic Review, 102(1): 337-63.

DOI: 10.1257/aer.102.1.337

Abstract

We study prisoners' dilemmas played in continuous time with flow payoffs accumulated over 60 seconds. In most cases, the median rate of mutual cooperation is about 90 percent. Control sessions with repeated matchings over eight subperiods achieve less than half as much cooperation, and cooperation rates approach zero in one-shot sessions. In follow-up sessions with a variable number of subperiods, cooperation rates increase nearly linearly as the grid size decreases, and, with one-second subperiods, they approach continuous levels. Our data support a strand of theory that explains how capacity to respond rapidly stabilizes cooperation and destabilizes defection in the prisoner's dilemma. (JEL C72, C78, C91)

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Authors

Friedman, Daniel (U CA, Santa Cruz)
Oprea, Ryan (U CA, Santa Cruz)

JEL Classifications

C72: Noncooperative Games
C78: Bargaining Theory; Matching Theory
C91: Design of Experiments: Laboratory, Individual


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