American Economic Review Vol. 102 No. 2 2012

Slow to Anger and Fast to Forgive: Cooperation in an Uncertain World

Drew Fudenberg¹; David G. Rand²; Anna Dreber³

¹ Department of Economics, Harvard University, 1805 Cambridge Street, Cambridge, MA 02138. · ² Program for Evolutionary Dynamics, Harvard University, 1 Brattle Square Suite 6, Cambridge, MA 02138. · ³ Department of Economics, Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden.

Abstract

We study the experimental play of the repeated prisoner’s dilemma when intended actions are implemented with noise. In treatments where cooperation is an equilibrium, subjects cooperate substantially more than in treatments without cooperative equilibria. In all settings there was considerable strategic diversity, indicating that subjects had not fully learned the distribution of play. Furthermore, cooperative strategies yielded higher payoffs than uncooperative strategies in the treatments with cooperative equilibria. In these treatments successful strategies were “lenient” in not retaliating for the first defection, and many were “forgiving” in trying to return to cooperation after inflicting a punishment.

DOI

10.1257/aer.102.2.720

Volume

102

Issue

2

Pages

720-749

Language

en

Sources

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Cite

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