Optimization incentives in dilemma games with strategic complementarity

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Abstract

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 with low strategic complementarity. 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 strategic complementarity. 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 the slope of the best-response function increases.
Original languageEnglish
Pages (from-to)103453
JournalEuropean Economic Review
Volume127
DOIs
Publication statusPublished - Aug 2020

Keywords

  • optimization incentives
  • strategic complementarity
  • repeated game
  • cooperation
  • experiments

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