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Negotiating Cooperation under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions

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  • Fabian Dvorak
  • Sebastian Fehrler

Abstract

Case studies of cartels and recent theory suggest that communication is a key factor for cooperation under imperfect monitoring, where actions can only be observed with noise. We conduct a laboratory experiment to study how communication affects cooperation under different monitoring structures. Pre-play communication reduces strategic uncertainty and facilitates very high cooperation rates at the beginning of an interaction. Under perfect monitoring, this is sufficient to reach a high and stable cooperation rate. However, repeated communication is important to maintain a high level of cooperation under imperfect monitoring, where players face additional uncertainty about the history of play.

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  • Fabian Dvorak & Sebastian Fehrler, 2024. "Negotiating Cooperation under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions," American Economic Journal: Microeconomics, American Economic Association, vol. 16(3), pages 232-258, August.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:3:p:232-58
    DOI: 10.1257/mic.20210117
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    2. Fabian Dvorak, 2020. "stratEst: Strategy Estimation in R," TWI Research Paper Series 119, Thurgauer Wirtschaftsinstitut, Universität Konstanz.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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