It's My Turn... Please, After You: An Experimental Study of Cooperation and Social Conventions

Todd Kaplan and Bradley Ruffle

No 403, Discussion Papers from University of Exeter, Department of Economics

Abstract: We introduce a class of two-player cooperation games where each player faces a binary decision, enter or exit. These games have a unique Nash equilibrium of entry. However, entry imposes a large enough negative externality on the other player such that the unique social optimum involves the player with the higher value to entry entering and the other player exiting. When the game is repeated and players' values to entry are private, cooperation admits the form of either taking turns entering or using a cuto? strategy and entering only for high private values of entry. Even with conditions that provide opportunities for unnoticed or non-punishable “cheating”, our empirical analysis including a simple strategy inference technique reveals that the Nash-equilibrium strategy is never the modal choice. In fact, most subjects employ the socially optimal symmetric cuto? strategy. These games capture the nature of cooperation in many economic and social situations such as bidding rings in auctions, competition for market share, labor supply decisions in the face of excess supply, queuing in line and courtship.

Keywords: cooperation; incomplete information; random payoffs; strategy inference; experimental economics. (search for similar items in EconPapers)
JEL-codes: C90 Z13 (search for similar items in EconPapers)
Date: 2004-08
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Working Paper: It's My Turn... Please, After You: An Experimental Study of Cooperation and Social Conventions (2004)
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