DP14595 Optimization incentives in dilemma games with strategic complementarity
|Author(s):||Jan Potters, Sigrid Suetens|
|Publication Date:||April 2020|
|Keyword(s):||Cooperation, Experiments, optimization incentives, repeated game, strategic complementarity|
|JEL(s):||C91, D01, D74|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14595|
We examine whether optimization incentives --- incentives to best-respond --- have an effect on behavior in finitely repeated two-player dilemma games with strategic complements. We run an experiment in which we increase optimization incentives in two different ways compared to a baseline treatment. In the first treatment, the increase in optimization incentives is created by an increase in payoffs on the best-response curve, while its slope remains unchanged. In the second treatment, the increase in optimization incentives takes the form of an increase in the slope of the best-response curve, while best-response payoffs remain unchanged. We find that the impact of optimization incentives is overshadowed by the effect of the slope of the best-response curve. Although an increase in optimization incentives leads subjects to best-respond more frequently when the best-response curve is relatively flat, it leads to more cooperative behavior if it is accompanied by an increase in the slope of the best-response function.