Mixed Equilibrium, Collaborative Dominance and Burning Money: An Experimental Study

Abstract

We experimentally study three aspects of \(2\times 2\) one-shot games with collaboratively dominant strategies: if subjects play according to the mixed Nash equilibrium; if the collaborative equilibrium has a focal point property; and if the burning money mechanism stimulates a collaborative behavior. First, our results show that players do not seem to play according to the mixed Nash equilibrium and that the collaborative equilibrium does not seem to have focal point properties. In fact, the subjects seem to prefer less risky strategies when compared to efficient ones. Our results also show that a burning money mechanism only helps players to collaborate when it transforms a collaborative profile of strategies into a collaborative equilibrium. This fact is justified because other burning money mechanisms will only help collaboration if the subjects were playing according to de mixed Nash equilibrium. Furthermore, even when burning money mechanisms improved the collaboration rate, such rate’s increase was smaller than the expected by the mixed Nash equilibrium.