Incorporating fairness in generalized games of matching pennies

Abstract

We examine individual behavior in generalized games of matching pennies. We have three main findings. First, individuals cooperate in these games; that is, they systematically select strategies that lead both players to obtain higher expected payoffs than in a Nash equilibrium. Second, existing models that assume altruistic preferences do not explain the cooperative behavior in these games. Third, among the main models in the extant literature, the only one that predicts the observed behavior is the quantal response equilibrium.