A usual criticism of the theory of infinitely repeated games is that it does not provide sharp predictions since there may be a multiplicity of equilibria. To address this issue, we present experimental evidence on the evolution of cooperation in infinitely repeated prisoner's dilemma games as subjects gain experience. We show that cooperation may prevail in infinitely repeated games, but the conditions under which this occurs are more stringent than the subgame perfect conditions usually considered or even a condition based on risk dominance. (JEL C71, C73)

A growing experimental literature studies the determinants of cooperation in infinitely repeated games, tests different predictions of the theory, and suggests an empirical solution to the problem of multiple equilibria. To provide a robust description of the literature's findings, we gather and analyze a metadata set of experiments on infinitely repeated prisoner's dilemma games. The experimental data show that cooperation is affected by infinite repetition and is more likely to arise when it can be supported in equilibrium. However, the fact that cooperation can be supported in equilibrium does not imply that most subjects will cooperate. High cooperation rates will emerge only when the parameters of the repeated game are such that cooperation is very robust to strategic uncertainty. We also review the results regarding the effect of imperfect monitoring, changing partners, and personal characteristics on cooperation and the strategies used to support it. (JEL C71, C73, D81, D83)

Abstract:The gift-exchange game is a form of sequential prisoner's dilemma, developed by Fehr, Kirchsteiger, and Riedl (1993), and popularized in a series of papers by Ernst Fehr and co-authors. While the European studies typically feature a high degree of gift exchange, the few U.S. studies provide some conflicting results. We find that the degree of gift exchange is surprisingly sensitive to an apparently innocuous change-whether or not a comprehensive payoff table is provided in the instructions. We also find significant and substantial time trends in responder behavior, suggesting that behavior in our game is sensitive to strategic considerations.JEL Classifications: A13, B49, C91, C92, J31

This paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners' dilemma game with imperfect public monitoring. We find that subjects' payoffs (i) decrease as noise increases, and (ii) are lower than the theoretical maximum for low noise, but exceed it for high noise. Under the assumption that the subjects play a threshold strategy with regime shifts, which uses thresholds on the public signal for transition between cooperation and punishment states, we find that the best fitting strategy simply compares the most recent public signal against a single threshold.

No abstract