Essays on cooperation and reciprocity

This dissertation comprises three essays that use theory-based experiments to gain understanding of how cooperation and efficiency is affected by certain variables and institutions in different types of strategic interactions prevalent in our society.

Chapter 2 analyzes indefinite horizon two-person dynamic favor exchange games with private information in the laboratory. Using a novel experimental design to implement a dynamic game with a stochastic jump signal process, this study provides insights into a relation where cooperation is without immediate reciprocity. The primary finding is that favor provision under these conditions is considerably less than under the most efficient equilibrium. Also, individuals do not engage in exact score-keeping of net favors, rather, the time since the last favor was provided affects decisions to stop or restart providing favors.

Evidence from experiments in Cournot duopolies is presented in Chapter 3 where players indulge in a form of pre-play communication, termed as revision phase, before playing the one-shot game. During this revision phase individuals announce their tentative quantities, which are publicly observed, and revisions are costless. The payoffs are determined only by the quantities selected at the end under real time revision, whereas in a Poisson revision game, opportunities to revise arrive according to a synchronous Poisson process and the tentative quantity corresponding to the last revision opportunity is implemented. Contrasting results emerge. While real time revision of quantities results in choices that are more competitive than the static Cournot-Nash, significantly lower quantities are implemented in the Poisson revision games. This shows that partial cooperation can be sustained even when individuals interact only once.

Chapter 4 investigates the effect of varying the message space in a public good game with pre-play communication where player endowments are private information. We find that neither binary communication nor a larger finite numerical message space results in any efficiency gain relative to the situation without any form of communication. Payoffs and public good provision are higher only when participants are provided with a discussion period through unrestricted text chat.

Essays on Correlated Equilibrium and Voter Turnout

This thesis consists of three essays in the areas of political economy and game theory, unified by their focus on the effects of pre-play communication on equilibrium outcomes.

Communication is fundamental to elections. Chapter 2 extends canonical voter turnout models, where citizens, divided into two competing parties, choose between costly voting and abstaining, to include any form of communication, and characterizes the resulting set of Aumann's correlated equilibria. In contrast to previous research, high-turnout equilibria exist in large electorates and uncertain environments. This difference arises because communication can coordinate behavior in such a way that citizens find it incentive compatible to follow their correlated signals to vote more. The equilibria have expected turnout of at least twice the size of the minority for a wide range of positive voting costs.

In Chapter 3 I introduce a new equilibrium concept, called subcorrelated equilibrium, which fills the gap between Nash and correlated equilibrium, extending the latter to multiple mediators. Subcommunication equilibrium similarly extends communication equilibrium for incomplete information games. I explore the properties of these solutions and establish an equivalence between a subset of subcommunication equilibria and Myerson's quasi-principals' equilibria. I characterize an upper bound on expected turnout supported by subcorrelated equilibrium in the turnout game.

Chapter 4, co-authored with Thomas Palfrey, reports a new study of the effect of communication on voter turnout using a laboratory experiment. Before voting occurs, subjects may engage in various kinds of pre-play communication through computers. We study three communication treatments: No Communication, a control; Public Communication, where voters exchange public messages with all other voters, and Party Communication, where messages are exchanged only within one's own party. Our results point to a strong interaction effect between the form of communication and the voting cost. With a low voting cost, party communication increases turnout, while public communication decreases turnout. The data are consistent with correlated equilibrium play. With a high voting cost, public communication increases turnout. With communication, we find essentially no support for the standard Nash equilibrium turnout predictions.