Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

8-2009

Publication Source

Judgment and Decision Making

Volume

4

Issue

5

Start Page

363

Last Page

384

Abstract

This paper compares the behavior of individuals playing a classic two-person deterministic prisoner’s dilemma (PD) game with choice data obtained from repeated interdependent security prisoner’s dilemma games with varying proba- bilities of loss and the ability to learn (or not learn) about the actions of one’s counterpart, an area of recent interest in experimental economics. This novel data set, from a series of controlled laboratory experiments, is analyzed using Bayesian hierarchical methods, the first application of such methods in this research domain. We find that individuals are much more likely to be cooperative when payoffs are deterministic than when the out-comes are probabilistic. A key factor explaining this difference is that subjects in a stochastic PD game respond not just to what their counterparts did but also to whether or not they suffered a loss. These findings are interpreted in the context of behavioral theories of commitment, altruism and reciprocity. The work provides a linkage between Bayesian statistics, experimental economics, and consumer psychology.

Keywords

prisoner’s dilemma, uncertainty, bayesian analysis, controlled experiments

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Date Posted: 27 November 2017

This document has been peer reviewed.