Repeated Play, Cooperation and Coordination: An Experimental Study
An experiment was conducted to test whether discounted repeated play leads to greater cooperation and coordination than one-shot play in a public good environment with incomplete information. The experiment was designed so that, theoretically, repeated play can sustain equilibria with substantially higher group earnings than result in the one-shot Bayesian Nash equilibrium. The design varied a number of environmental parameters, including the size of the group, and the statistical distribution of marginal rates of substitution between the public and private good. Marginal rates of substitution were private information but the statistical distribution was common knowledge. The results indicate that repetition leads to greater cooperation, and that the magnitude of these gains depends systematically both on the ability of players to monitor each other's strategy and on the environmental parameters.
© 1994 The Review of Economic Studies Limited. Received August 1, 1992. Accepted March 1, 1994. Acknowledgements. The authors are thankful for the research support of the National Science Foundation through grants #SES-8718650 and #SES-9011828. The research assistance of Mark Fey, Jessica Goodfellow, and Jeff Prisbrey is gratefully acknowledged for their help in conducting the experiments. Sanjay Srivastava was instrumental in developing the computer network used for the experiments. We are grateful for detailed comments on earlier drafts by Roberta Herzberg and by Rosemarie Nagel. The exposition has benefitted from suggestions by three referees and an editor. Work on this paper began while Rosenthal was a Fellow at the International Centre for Economic Research and a Fellow at the Center for Advanced Study in the Behavioral Sciences. He is grateful for financial support provided by National Science Foundation #BNS-8700864 during his stay at CASBS.