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Infinitely repeated games in the laboratory: four perspectives on discounting and random termination

Published online by Cambridge University Press:  14 March 2025

Guillaume R. Fréchette  and
Sevgi Yuksel
Guillaume R. Fréchette*
Affiliation:
New York University, New York, NY, USA
Sevgi Yuksel
Affiliation:
University of California, Santa Barbara, USA
*
[email protected]
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Abstract

This paper compares behavior under four different implementations of infinitely repeated games in the laboratory: the standard random termination method [proposed by Roth and Murnighan (J Math Psychol 17:189–198, 1978)] and three other methods that de-couple the expected number of rounds and the discount factor. Two of these methods involve a fixed number of repetitions with payoff discounting, followed by random termination [proposed by Sabater-Grande and Georgantzis (J Econ Behav Organ 48:37–50, 2002)] or followed by a coordination game [proposed in (Andersson and Wengström in J Econ Behav Organ 81:207–219, 2012; Cooper and Kuhn in Am Econ J Microecon 6:247–278, 2014a)]. We also propose a new method—block random termination—in which subjects receive feedback about termination in blocks of rounds. We find that behavior is consistent with the presence of dynamic incentives only with methods using random termination, with the standard method generating the highest level of cooperation. Subject behavior in the other two methods display two features: a higher level of stability in cooperation rates and less dependence on past experience. Estimates of the strategies used by subjects reveal that across implementations, even when the discount rate is the same, if interactions are expected to be longer defection increases and the use of the Grim strategy decreases.

Keywords

Infinitely repeated gamesDiscountingRandom terminationPrisoner’s dilemma

JEL classification

C9: Design of Experiments C91: Laboratory, Individual Behavior C92: Laboratory, Group Behavior C73: Stochastic and Dynamic Games • Evolutionary Games • Repeated Games C72: Noncooperative Games
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 2 , June 2017 , pp. 279 - 308
Copyright
Copyright © 2016 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9494-z) contains supplementary material, which is available to authorized users.

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