Punishment strategies in repeated games: Evidence from experimental markets

Julian Wright

Games and Economic Behavior, 2013, vol. 82, issue C, 91-102

Abstract: An experiment is designed to provide a snapshot of the strategies used by players in a repeated price competition game with a random continuation rule. One hundred pairs of subjects played the game over the Internet, with subjects having a few days to make their decisions in each round. Occasionally subjects are asked to enter one-period-ahead pricing strategies instead of prices. According to the elicited strategies, between 90% and 95% of subjects punish less harshly (in their initial response to a deviation) than implied by the grim trigger strategy, and do so in a way that depends on the size of the other subjectʼs deviation. Future earnings are highest for subjects adopting the tit-for-tat strategy, even after controlling for a subjectʼs past earnings. Punishment strategies are generally softer and more graduated than implied by a grim trigger strategy, and do better as a result.

Keywords: Experiment; Cooperation; Tit-for-tat; Grim trigger strategy (search for similar items in EconPapers)
JEL-codes: C72 C73 C90 D43 D83 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:82:y:2013:i:c:p:91-102

DOI: 10.1016/j.geb.2013.06.012

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