LEPPANEN, I. and HAMALAINEN, R.P., 2017. Emotions in a repeated cournot duopoly game: A psychophysiological experiment. Journal of Neuroscience, Psychology, and Economics, In Press.
The reason why cooperation occurs in repeated games has remained a puzzle. Earlier literature has maintained that reciprocal behavior that gives rise to cooperation can be entirely self-regarding. However, experimental evidence shows that reciprocal behavior is other-regarding in many one-shot games. This other-regarding behavior is believed to have an emotional foundation. We hypothesized that emotions play a role in reciprocal behavior in repeated games as well. We tested this hypothesis by measuring the psychophysiological correlates of emotions from pairs of subjects as they played a repeated Cournot duopoly game. The players, who were in different rooms and remained anonymous to each other, made adjustment decisions to their production quantities that determined their payoffs in each round. Autonomic nervous system arousal was activated when the payoffs of both players decreased in a round, whereas positive affect was expressed when the payoffs of both players increased in a round. The disgust expression was related to a player's own one-sided increase in the payoff. Anger was expressed occasionally but less frequently when the outcome was the player's ideal outcome. An upwards adjustment of the production quantity was observed when the other player did not cooperate. This had the effect of decreasing the payoffs of both players and this was also related to an increase in the level of arousal. Our results provide evidence on how emotions are present in reciprocal behavior in a repeated social dilemma game. The results challenge recent behavioral research that advocates self-regarded motivations of cooperation in repeated games.
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