Negotiating Cooperation under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions

Fabian Dvorak and Sebastian Fehrler

American Economic Journal: Microeconomics, 2024, vol. 16, issue 3, 232-58

Abstract: Case studies of cartels and recent theory suggest that communication is a key factor for cooperation under imperfect monitoring, where actions can only be observed with noise. We conduct a laboratory experiment to study how communication affects cooperation under different monitoring structures. Pre-play communication reduces strategic uncertainty and facilitates very high cooperation rates at the beginning of an interaction. Under perfect monitoring, this is sufficient to reach a high and stable cooperation rate. However, repeated communication is important to maintain a high level of cooperation under imperfect monitoring, where players face additional uncertainty about the history of play.

JEL-codes: C72 C73 D81 D82 D83 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Negotiating Cooperation under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions (2018)
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DOI: 10.1257/mic.20210117

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