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Finitely repeated games with social preferences

Published online by Cambridge University Press:  14 March 2025

Jörg Oechssler
Jörg Oechssler*
Affiliation:
Department of Economics, University of Heidelberg, Bergheimer Str. 58, 69115 Heidelberg, Germany
*
[email protected]
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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.

Keywords

Social preferencesFinitely repeated gamesInequity aversionERC

JEL classification

C73: Stochastic and Dynamic Games • Evolutionary Games • Repeated Games C72: Noncooperative Games
Type
Article
Information
Experimental Economics , Volume 16 , Issue 2 , June 2013 , pp. 222 - 231
Copyright
Copyright © 2012 Economic Science Association

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Footnotes

I thank Christoph Brunner, David Cooper, John Duffy, Dirk Engelmann, Nikos Nikiforakis, Axel Ockenfels, Klaus Schmidt, and participants of the ESA conference in Chicago for discussions. Three referees and the editor provided very useful comments.

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