The Shadow of the Past#

How Experience Affects Behavior in an Iterated Prisoner’s Dilemma Experiment#

Ulrike Leopold-Wildburger
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Institute for Statistics and Operations Research
University of Graz Universitaetsstraße 15/E3, A-8010 Graz, Austria

Abstract

We study the development of cooperation in a repeated prisoner’s dilemma experiment with teams as players, unknown length and unknown continuation probability. Players are rematched with a new team twice. In such a situation - often found outside the laboratory - agents can get an idea on the likely duration of future interactions by relying on prior experience. Our main finding is that participants apparently transform the infinite-horizon game into a finite-horizon game.

Our open question is: How develops cooperation if participants are not informed about the continuation probabilities but can form expectations from prior experience? How does the shadow of the future interact with the shadow of the past?

Not only do we observe decay in cooperation but also unraveling towards the end of a matching. We found a pronounced restart effect that induces a steady rise in average cooperation over matchings. Such an effect is not observed after the unexpected continuation of the third match. Stable cooperation paths of considerable length are induced when both players start the matching with joint cooperative moves. Our decision-based findings are corroborated by the video protocols of the team discussions.

EL Classification Number: C72, C81, C91
Key words: repeated prisoner’s dilemma, unknown length, unknown continuation probability, experience, unraveling of cooperation, restart effect, mutual cooperation.