Experimental test of the multimarket contact theory with discount factor control

Abstract

The multimarket contact theory,which is based on the infinitely repeated game theory, predicts that if the discount factor is controlled properly, (a) playing the original PD game with the more cooperative PD game simultaneously facilitates more cooperation in the original game than playing only the original game, and (b) the degree of cooperation in playing the original two games simultaneously is the same as the degree in playing only the single game. In this study, we conducted a series of experiments by controlling the discount factor and attained the following results. (1) as the discount factor increases, the degree of cooperation increases. (2)as the number of simultaneously played games increases, the degree of cooperation decreases. (3) when the number of games is two, the degree of cooperation is higher when playing two original PD games than when playing the original PD game and the more cooperative PD game. Result (1) is basically the same as Dal Bo's one. However, results (2) and (3) does not support predictions (a) and (b) but indicate the reverse is true. By these results, it is important to take the number of games and the payoff structure into account when we deal with the multimarket contact.