Abstract
This experiment investigates a stochastic version of the infinitely repeated prisoner's dilemma. The stochastic element introduces the importance of beliefs about the future for supporting cooperation as well as cooperation and defection on the equilibrium path. There is more coop- eration in treatments where beliefs predict cooperation after subjects gain sufficient experience. There is some evidence for cooperation and defection as predicted by equilibrium, but there is stronger evidence for behavior conditioning on past actions that is not consistent with equilib- rium play. This latter finding is confirmed with a maximum likelihood strategy estimation where the repeated game strategies Grim Trigger and Tit-for-Tat are the most prevalent cooperative strategies, although they are not equilibria in this environment.
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