Research Article

Economic Theory

, Volume 28, Issue 3, pp 603-632

First online:

Inferring repeated-game strategies from actions: evidence from trust game experiments

  • Jim Engle-WarnickAffiliated withDepartment of Economics, McGill University
  • , Robert L. SlonimAffiliated withDepartment of Economics, Weatherhead School of Management, Case Western Reserve University Email author 

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Combining a strategy model, an inference procedure and a new experimental design, we map sequences of observed actions in repeated games to unobserved strategies that reflect decision-makers’ plans. We demonstrate the method by studying two institutional settings with distinct theoretical predictions. We find that almost all strategies inferred are best responses to one of the inferred strategies of other players, and in one of the settings almost all of the inferred strategies, which include triggers to punish non-cooperators, are consistent with equilibrium strategies. By developing a method to infer unobserved repeated-game strategies from actions, we take a step toward making game theory a more applied tool, bridging a gap between theory and observed behavior.

Keywords and Phrases:

Repeated games Strategies Finite automata Trust Experimental economics.