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Finitely repeated games with social preferences

Jörg Oechssler

Experimental Economics, 2013, vol. 16, issue 2, 222-231

Abstract: A well-known result from the theory of finitely repeated games states that if the stage game has a unique equilibrium, then there is a unique subgame perfect equilibrium in the finitely repeated game in which the equilibrium of the stage game is being played in every period. Here I show that this result does in general not hold anymore if players have social preferences of the form frequently assumed in the recent literature, for example in the inequity aversion models of Fehr and Schmidt (Quartely Journal of Economics 114:817–868, 1999 ) or Bolton and Ockenfels (American Economic Review 100:166–193, 2000 ). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all. This finding should have relevance for all experiments with repeated interaction, whether with fixed, random or perfect stranger matching. Copyright Economic Science Association 2013

Keywords: Social preferences; Finitely repeated games; Inequity aversion; ERC; C72; C73 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Finitely repeated games with social preferences (2011) Downloads
Working Paper: Finitely repeated games with social preferences (2011) Downloads
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