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Intelligence, Errors and Strategic Choices in the Repeated Prisoners' Dilemma

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  • Proto, Eugenio
  • Rustichini, Aldo
  • Sofianos, Andis
Abstract
A large literature in behavioral economics has emphasized in the last decades the role of individual differences in social preferences (such as trust and altruism) and in influencing behavior in strategic environments. Here we emphasize the role of attention and working memory, and show that social interactions among heterogeneous groups are likely to be mediated by differences in cognitive skills. Our design uses a Repeated Prisoner's Dilemma, and we compare rates of cooperation in groups of subjects grouped according to their IQ, with those in combined groups. While in combined groups we observe higher cooperation rates and profits than in separated groups (with consistent gains among lower IQ subjects and relatively smaller losses for higher IQ subjects), higher IQ subjects become less lenient when they are matched with lower IQ subjects than when they play separately. We argue that this is an instance of a general phenomenon, which we demonstrate in an evolutionary game theory model, where higher IQ among subjects determines -- through better working memory -- a lower frequency of errors in strategy implementation. In our data, we show that players indeed choose less lenient strategies in environments where subjects have higher error rates. The estimations of errors and strategies from the experimental data are consistent with the hypothesis and the predictions of the model.

Suggested Citation

  • Proto, Eugenio & Rustichini, Aldo & Sofianos, Andis, 2020. "Intelligence, Errors and Strategic Choices in the Repeated Prisoners' Dilemma," CEPR Discussion Papers 14349, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14349
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    Cited by:

    1. Dal Bó, Pedro & Fréchette, Guillaume R. & Kim, Jeongbin, 2021. "The determinants of efficient behavior in coordination games," Games and Economic Behavior, Elsevier, vol. 130(C), pages 352-368.
    2. Michalis Drouvelis & Graeme Pearce, 2021. "Understanding the Link between Intelligence and Lying," CESifo Working Paper Series 9223, CESifo.
    3. Masaki Aoyagi & Guillaume Frechette & Sevgi Yuksel, 2021. "Beliefs in Repeated Games," ISER Discussion Paper 1119rr, Institute of Social and Economic Research, Osaka University, revised May 2022.
    4. Zakharov, Alexei & Bondarenko, Oxana, 2021. "Social status and social learning," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    5. Drouvelis, Michalis & Pearce, Graeme, 2023. "Is there a link between intelligence and lying?," Journal of Economic Behavior & Organization, Elsevier, vol. 206(C), pages 182-203.
    6. Masaki Aoyagi & Guillaume Frechette & Sevgi Yuksel, 2021. "Beliefs in Repeated Games," ISER Discussion Paper 1119, Institute of Social and Economic Research, Osaka University.
    7. Brocas, Isabelle & Carrillo, Juan D., 2022. "Adverse selection and contingent reasoning in preadolescents and teenagers," Games and Economic Behavior, Elsevier, vol. 133(C), pages 331-351.
    8. Kirchkamp, Oliver & Oechssler, Joerg & Sofianos, Andis, 2021. "The Binary Lottery Procedure does not induce risk neutrality in the Holt & Laury and Eckel & Grossman tasks," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 348-369.

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    More about this item

    Keywords

    Repeated prisoner's dilemma; Cooperation; Intelligence; Iq; Strategy; Error in transition;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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