Negotiating Cooperation Under Uncertainty : Communication in Noisy, Indefinitely Repeated Interactions

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2023
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American Economic Journal : Microeconomics. American Economic Association (AEA). ISSN 1945-7669. eISSN 1945-7685
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Case studies of cartels and recent theory suggest that communication is a key factor for cooperation under imperfect monitoring, where actions can only be observed with noise. We conduct a laboratory experiment to study how communication affects cooperation under different monitoring structures. Pre-play communication reduces strategic uncertainty and facilitates very high cooperation rates at the beginning of an interaction. Under perfect monitoring, this is sufficient to reach a high and stable cooperation rate. However, repeated communication is important to maintain a high level of cooperation under imperfect monitoring, where players face additional uncertainty about the history of play.

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ISO 690DVORAK, Fabian, Sebastian FEHRLER, 2023. Negotiating Cooperation Under Uncertainty : Communication in Noisy, Indefinitely Repeated Interactions. In: American Economic Journal : Microeconomics. American Economic Association (AEA). ISSN 1945-7669. eISSN 1945-7685
BibTex
@article{Dvorak2023Negot-51330.2,
  year={2023},
  title={Negotiating Cooperation Under Uncertainty : Communication in Noisy, Indefinitely Repeated Interactions},
  url={https://www.aeaweb.org/articles?id=10.1257/mic.20210117},
  issn={1945-7669},
  journal={American Economic Journal : Microeconomics},
  author={Dvorak, Fabian and Fehrler, Sebastian}
}
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