When best-replies are not in equilibrium: understanding cooperative behaviour

Irenaeus Wolff

No 88, TWI Research Paper Series from Thurgauer Wirtschaftsinstitut, Universität Konstanz

Abstract: To understand cooperative behaviour in social-dilemma experiments, we need to understand the game participants play not only in monetary but in preference terms. Does a Nash-prediction based on participants' actual preferences describe their behaviour in a public-good experiment well? And if not, where does the observed behaviour diverge from the prediction? This study provides an environment which allows to answer these questions: when making their contribution decision, participants are informed about their co-players� priorly-elicited conditional contribution preferences. This induces common knowledge of preferences and thereby leads to direct experimental control over the game participants play. Results show that most people play best-responses to their beliefs. At the same time, beliefs in a third of the cases do not correspond to an equilibrium prediction that is based on the elicited conditional-cooperation preferences. Moreover, more often than not, beliefs are empirically inaccurate. This holds true even in a treatment that gives participants the option to look up the set of equilibria of their game.

Keywords: Public good; social dilemma; Nash-equilibrium; rational beliefs; conditional cooperation; social preferences. (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-evo, nep-exp, nep-gth, nep-hpe and nep-soc
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Related works:
Working Paper: When best-replies are not in equilibrium: Understanding cooperative behaviour (2015)
Working Paper: When best-replies are not in Equilibrium: Understanding Cooperative Behaviour (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:twi:respas:0088

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