Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence

TLDR

The study examines the sequential equilibrium reputation hypothesis in the finitely repeated prisoner's dilemma through controlled experiments. Subjects were prevented from building reputations and their beliefs about opponents being irrational or altruistic were manipulated. Results strongly support the sequential equilibrium prediction and show that inherent altruism and beliefs about opponents’ altruism have no effect. © 1993 Royal Economic Society.

Abstract

This paper presents experiments designed to examine the sequential equilibrium reputation hypothesis in the finitely repeated prisoner's dilemma. The authors test the hypothesis by controlling the subjects' ability to build reputations and by manipulating their beliefs that their opponent is irrational or altruistic. The responses of subjects strongly support the sequential equilibrium prediction. The results also suggest an important role for 'homemade altruism,' that is, a natural tendency to cooperate that subjects bring to the experiment from the outside. The authors find that there may be no difference between the beliefs that an opponent is altruistic and the actual chance it is so. Copyright 1993 by Royal Economic Society.