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Experimental Economics

, Volume 20, Issue 2, pp 279–308 | Cite as

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

  • Guillaume R. FréchetteEmail author
  • Sevgi Yuksel
Original Paper

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 games Discounting Random termination Prisoner’s dilemma 

JEL Classification

C9 C72  C73  C91  C92  

Notes

Acknowledgments

We would like to thank two anonymous referees, David Cooper, Drew Fudenberg, Ryan Oprea, Andrew Schotter, Ekatarina Sherstyuk, Alistair Wilson, participants at the 2011 ESA Conference and the NYU experimental group for helpful comments, Emanuel Vespa for his help developing the ztree code to conduct the experiment; also CESS and the C.V. Starr Center for financial support. Fréchette gratefully acknowledges the support of the NSF via Grants SES-0924780, SES-1225779, and SES-1558857.

Supplementary material

10683_2016_9494_MOESM1_ESM.pdf (351 kb)
Supplementary material 1 (PDF 351 kb)

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Copyright information

© Economic Science Association 2016

Authors and Affiliations

  1. 1.New York UniversityNew YorkUSA
  2. 2.University of CaliforniaSanta BarbaraUSA

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