Collusion as public monitoring becomes noisy

Experimental evidence

Masaki Aoyagi, Guillaume Frechette

    Research output: Contribution to journalArticle

    Abstract

    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' strategy 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.

    Original languageEnglish (US)
    Pages (from-to)1135-1165
    Number of pages31
    JournalJournal of Economic Theory
    Volume144
    Issue number3
    DOIs
    StatePublished - May 2009

    Fingerprint

    Monitoring
    Collusion
    Repeated prisoner's dilemma
    Laboratory experiments
    Repeated games
    Punishment
    Prisoner's dilemma game

    Keywords

    • Collusion
    • Cooperation
    • Imperfect public monitoring
    • Repeated games

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Collusion as public monitoring becomes noisy : Experimental evidence. / Aoyagi, Masaki; Frechette, Guillaume.

    In: Journal of Economic Theory, Vol. 144, No. 3, 05.2009, p. 1135-1165.

    Research output: Contribution to journalArticle

    Aoyagi, Masaki ; Frechette, Guillaume. / Collusion as public monitoring becomes noisy : Experimental evidence. In: Journal of Economic Theory. 2009 ; Vol. 144, No. 3. pp. 1135-1165.
    @article{565fcef53b4c4511a4203ea2fc2ecb1a,
    title = "Collusion as public monitoring becomes noisy: Experimental evidence",
    abstract = "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' strategy 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.",
    keywords = "Collusion, Cooperation, Imperfect public monitoring, Repeated games",
    author = "Masaki Aoyagi and Guillaume Frechette",
    year = "2009",
    month = "5",
    doi = "10.1016/j.jet.2008.10.005",
    language = "English (US)",
    volume = "144",
    pages = "1135--1165",
    journal = "Journal of Economic Theory",
    issn = "0022-0531",
    publisher = "Academic Press Inc.",
    number = "3",

    }

    TY - JOUR

    T1 - Collusion as public monitoring becomes noisy

    T2 - Experimental evidence

    AU - Aoyagi, Masaki

    AU - Frechette, Guillaume

    PY - 2009/5

    Y1 - 2009/5

    N2 - 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' strategy 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.

    AB - 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' strategy 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.

    KW - Collusion

    KW - Cooperation

    KW - Imperfect public monitoring

    KW - Repeated games

    UR - http://www.scopus.com/inward/record.url?scp=64049115647&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=64049115647&partnerID=8YFLogxK

    U2 - 10.1016/j.jet.2008.10.005

    DO - 10.1016/j.jet.2008.10.005

    M3 - Article

    VL - 144

    SP - 1135

    EP - 1165

    JO - Journal of Economic Theory

    JF - Journal of Economic Theory

    SN - 0022-0531

    IS - 3

    ER -