Strategy revision opportunities and collusion

Abstract

This paper studies whether and how strategy revision opportunities affect levels of collusion in indefinitely repeated two-player games. Consistent with standard theory, we find that such opportunities do not affect strategy choices, or collusion levels, if the game is of strategic substitutes. In games of strategic complements, by contrast, revision opportunities lead to more collusion. We discuss alternative explanations for this result.

Eliciting Strategies in Indefinitely Repeated Games of Strategic Substitutes and Complements

“…Participants respond more often with a cooperative choice to actions A/B and they use punishing responses less often under complements (see Table D.3 in Appendix D.2). This is in line with behavioural evidence obtained in a hot treatment by Potters and Suetens (2009) who find more cooperation in the complements compared to the substitutes game (see also Embrey et al, 2016). We summarize our results obtained in this section as follows.…”

“…In addition, we conducted some treatments where we studied variations on renegotiation and strategic commitment. Details on those are reported in Embrey et al (2016). Other than the treatments mentioned we did not conduct any additional treatments.…”

“…In this section, we describe the main details of the experimental design and procedures. We use data from two treatments of the experiment conducted for our companion paper, Embrey et al (2016). 5 In Section 2.1 we describe the design of these two treatments and why it is well suited for the questions asked in this paper.…”

“…5 Embrey et al (2016) focuses on strategy revision opportunities. The treatments Elicit in the present study are called unilateral revision opportunities there.…”

The Evolution of Cooperation: The Role of Costly Strategy Adjustments

“…Dal Bó and Fréchette (2018) provides a review of the literature on repeated prisoner's dilemma games. A closely related paper that does not examine the prisoner's dilemma, Embrey, Mengel, and Peeters (2016b), investigates whether strategy revision opportunities affect collusion and strategy choices in indefinitely repeated games of strategic complements and substitutes. They find that allowing a unilateral revision opportunity (at a small cost) affects collusive behavior in games of strategic complements but not in games of strategic substitutes.…”