Friends or Strangers? Strategic Uncertainty and Cooperation across Experimental Games of Strategic Complements and Substitutes

Gabriele Chierchia (), Fabio Tufano () and Giorgio Coricelli ()
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Gabriele Chierchia: Center for Mind/Brain Science, University of Trento; and Planck Institute for Human Cognitive and Brain Sciences, Berlin
Fabio Tufano: School of Economics, University of Nottingham
Giorgio Coricelli: Center for Mind/Brain Science, University of Trento; and Department of Economics, University of Southern California

No 2017-03, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: It is commonly assumed that friendship should decrease strategic uncertainty in games involving tacit coordination. However, this has never been tested on two 'opposite poles' of coordination, namely, games of strategic complements and substitutes. We present an experimental study having participants interacting with either a friend or a stranger in two classic games: (i.) the stag hunt game, which exhibits strategic complementarity; (ii.) the entry game, which exhibits strategic substitutability. Both games capture a frequent trade-off between a potentially high paying but uncertain action and a lower paying but safe alternative. We find that, relative to strangers, friends exhibit a propensity towards uncertainty in the stag hunt game, but an aversion to uncertainty in the entry game. Friends also 'trembled' less than strangers in the stag hunt game but this advantage was lost in the entry game. We further investigate the role of interpersonal similarities and friendship qualities on friendship’s differential impact on uncertainty across games of strategic complements and substitutes.

Keywords: coordination; entry game; friendship; strategic complementarity; strategic substitutability; stag hunt game; strategic uncertainty (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hpe and nep-soc
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