In Support of Trigger Strategies: Experimental Evidence from Two-Person Non-cooperative Games

Abstract

Cooperative equilibria can be supported in a repeated game when players use trigger strategies. This paper tests how well trigger strategies explain behavior in two-person experimental games. Reducing payoffs for choices larger than the Cournot level induces smaller average outputs, consistent with trigger strategy models generally. Reducing payoffs for choices well above the Cournot level will not affect agents' behavior if it is consistent with a grim strategy, but would matter for trigger strategies with short-lived but intense punishment phases. We find that behavior is most consistent with a trigger strategy that involves a longer-lived, less intense punishment phase.