Economic Theory

, Volume 28, Issue 3, pp 603–632

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

Research Article

DOI: 10.1007/s00199-005-0633-6

Cite this article as:
Engle-Warnick, J. & Slonim, R.L. Economic Theory (2006) 28: 603. doi:10.1007/s00199-005-0633-6

Summary.

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 gamesStrategiesFinite automataTrustExperimental economics.

Copyright information

© Springer-Verlag Berlin/Heidelberg 2006

Authors and Affiliations

  1. 1.Department of EconomicsMcGill UniversityMontrealCANADA
  2. 2.Department of EconomicsWeatherhead School of Management, Case Western Reserve UniversityClevelandUSA