Repeated Play, Cooperation and Coordination: An Experimental Study

Abstract

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.