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CAN SUBGAME PERFECT EQUILIBRIUM THREATS FOSTER COOPERATION? AN EXPERIMENTAL TEST OF FINITE‐HORIZON FOLK THEOREMS

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This paper considers extended prisoners' dilemma games in which a second pure strategy equilibrium in the stage game allows for mutual cooperation in all but the last round of the finitely repeated game as an equilibrium outcome. We distinguish a strict and a weak extension of the prisoners' dilemma game in a long and a short horizon treatment. A comparison with the corresponding finitely repeated prisoners' dilemma games shows that the strict additional equilibrium increases cooperation rates while the weak does not. This result is robust to the variation of the time horizon. (JEL C73, C91)
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Document Type: Research Article

Affiliations: 1: Research Fellow, Max Planck Institute of Economics, Strategic Interaction Group, Kahlaische Str. 10, 07745 Jena, Germany. Phone +49 (0)3641 686 637, Fax: +49 (0)3641 686 667 2: Assistant Professor for Behavioral Economics, Department of Economics, University of Konstanz, Box 131, 78457 Konstanz, Germany. Phone +49 (0)7531 88 3214, Fax: +49(0)7531 88 2145 3: Director of the Strategic Interaction Group, Max Planck Institute of Economics, Kahlaische Str. 10, 07745 Jena, Germany. Phone +49 (0)3641 686 620, Fax: +49 (0)3641 686 667 4: Professor for Competition Policy, Department of Business and Economics, Humboldt-University Berlin, Spandauer Str. 1, 10099 Berlin. Phone +49 (0)30 2093 5895, Fax: +49 (0)30 2093 5787

Publication date: April 1, 2013

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