Time Horizon and Cooperation in Continuous Time

Abstract

When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of dierent time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We nd that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic.Moreover, a deterministic duration generates dierent aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end. JEL Classication Numbers: C72, C73, C91, C92, D74