Seminar

Beliefs in Repeated Games

Economics

Speaker:Guillaume Frechette, New York University
Website: http://people.cess.fas.nyu.edu/frechette/html/index.htm
Date: Friday 16 October 2020
Time: 14.00
Location: Online via Zoom (link from A.L.Bassett@exeter.ac.uk)

Further details

This paper uses a laboratory experiment to study beliefs and their relationship to action and strategy choices in finitely and indefinitely repeated prisoners’ dilemma games. We find that subjects’ beliefs elicited in each round about the other player’s action are remarkably accurate despite some important systematic deviations corresponding to early pessimism in indefinite games and late optimism in finite games. The data reveals a close link between beliefs and actions which differs between the two treatments. In particular, the same history of play leads to different beliefs, and the same belief leads to different action choices, in finite and indefinite games. We then use the subjects’ beliefs over actions in each round to identify their supergame beliefs over supergame strategies played by the other player. We find that these supergame beliefs properly capture the different classes of strategies used in each game. Importantly, subjects using different strategies have different supergame beliefs and for the most part strategies are subjectively rational given supergame beliefs. We also find that subjects underestimate the likelihood that others move to defection earlier than they do.