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American Economic Journal: Microeconomics: Vol. 3 No. 3 (August 2011)

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Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence

Article Citation

Blonski, Matthias, Peter Ockenfels, and Giancarlo Spagnolo. 2011. "Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence." American Economic Journal: Microeconomics, 3(3): 164-92.

DOI: 10.1257/mic.3.3.164

Abstract

We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion that is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor δ* strictly larger than δ, the standard criterion that has often been used in applications. In an experimental test we find a strong predictive power of our proposed criterion. For parameter changes where the standard and our criterion predict differently, changes in observed cooperation follow predictions based on δ* . (JEL C72, C73, C92, D81)

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Authors

Blonski, Matthias (Johann Wolfgang Goethe U Frankfurt)
Ockenfels, Peter (Johann Wolfgang Goethe U Frankfurt)
Spagnolo, Giancarlo (U Rome "Tor Vergata" and Stockholm School of Economics)

JEL Classifications

C72: Noncooperative Games
C73: Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
C92: Design of Experiments: Laboratory, Group Behavior
D81: Criteria for Decision-Making under Risk and Uncertainty

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