Ulric B. and Evelyn L. Bray Social Sciences Seminar
Abstract: We study the effects of time preferences on cooperation in an infinitely repeated prisoner's dilemma game experiments. In experiment 1, we implement a novel experimental design in which subjects play repeated games in the lab all at once, but stage game payoffs are paid over an extended period of time. We exogenously vary subjects' discount factors by changing the time window of stage game payoffs (weekly or monthly) and eliminate/weaken present bias by introducing a delay for the first-stage game payoffs. We find clear evidence higher discount factors promote greater cooperation and present bias reduces cooperation. In Experiment 2, we conduct a novel longitudinal design in Amazon's Mechanical Turk. Subjects play one repeated game over several weeks-one stage game each week. We find that subjects' measured time preferences are associated with various facets of cooperation in the play of a repeated game. First, consistent with a model of quasi-hyperbolic discounting and its application to repeated games, the degree of present bias is negatively correlated with cooperation. Second, subjects with time consistent preferences are less likely to deviate from their plan of action. Third, subjects with time varying preferences are more likely to break cooperative relationships.