Conjecture, uncertainty, and cooperation in prisoner's dilemma games: Some experimental evidence

Abstract

This paper presents experimental tests of two models of cooperation in finitely-repeated prisoner's dilemma games (Kreps, Milgrom, Roberts, and Wilson, 1982). The models suggest that either a perception that the other party may use the tit-for-tat strategy or mutual uncertainty concerning dominant noncooperative strategies can lead to rational cooperation. The experiment independently manipulated both types of uncertainty and allowed for inferences concerning the players' prior, ‘homemade’ preferences for cooperation. Only in relatively restricted situations did either type of uncertainty promote cooperation. Instead, players cooperated much more than was predicted; they also cooperated more when they were certain of their opponents' payoffs.