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Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences

Author

Listed:
  • John Duffy
  • Felix Munoz-Garcia

    (School of Economic Sciences, Washington State University)

Abstract

This paper investigates incomplete information and signaling about players?inequity aversion in the simultaneous and sequential-move prisoner?s dilemma game. We first evaluate the role of incomplete information according to: (1) whether uncertainty helps select the effcient equilibrium outcome, and (2) whether more cooperation can be sustained under incomplete than under complete information. We then examine the possibility of information transmission among individuals in a signaling game. A separating equilibrium can be supported in which players with high concerns about fairness bear the cost of cooperating in order to reveal their type to opponents, thus promoting cooperation in subsequent periods. We also fi?nd a pooling equilibrium in which a player unconcerned about inequity aversion initially cooperates in order to mislead the uninformed player. This misleading strategy induces cooperation from the uninformed player in the subsequent stage of the game, moment at which the unconcerned player takes the opportunity to defect. This "backstabbing" equilibrium helps explain frequently observed behavior in ?finitely-repeated experiments.

Suggested Citation

  • John Duffy & Felix Munoz-Garcia, 2010. "Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences," Working Papers 2010-19, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:munoz-8
    as

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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Munoz/WP-2010-19.pdf
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    References listed on IDEAS

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    Cited by:

    1. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, vol. 3(1), pages 1-22, March.

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    More about this item

    Keywords

    Prisoner?s Dilemma; Inequity aversion; Incomplete Information; Signaling;
    All these keywords.

    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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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