Optimization incentives in dilemma games with strategic complementarity

Sigrid Suetens and Jan Potters

No 14595, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine whether optimization incentives --- incentives to best-respond --- have an effect on behavior in finitely repeated two-player dilemma games with strategic complements. We run an experiment in which we increase optimization incentives in two different ways compared to a baseline treatment. In the first treatment, the increase in optimization incentives is created by an increase in payoffs on the best-response curve, while its slope remains unchanged. In the second treatment, the increase in optimization incentives takes the form of an increase in the slope of the best-response curve, while best-response payoffs remain unchanged. We find that the impact of optimization incentives is overshadowed by the effect of the slope of the best-response curve. Although an increase in optimization incentives leads subjects to best-respond more frequently when the best-response curve is relatively flat, it leads to more cooperative behavior if it is accompanied by an increase in the slope of the best-response function.

Keywords: Optimization incentives; Strategic complementarity; Repeated game; Cooperation; Experiments (search for similar items in EconPapers)
JEL-codes: C91 D01 D74 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-exp and nep-gth
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Citations: View citations in EconPapers (1)

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Journal Article: Optimization incentives in dilemma games with strategic complementarity (2020)
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