Cooperation in Indefinitely Repeated Games of Strategic Complements and Substitutes

We report on experiments conducted to study the effect of strategic substitutability and strategic complementarity on the extent of cooperative behavior in indefinitely repeated two-player games. On average, choices in our experiment do not differ between the strategic complements and substitutes treatments. However, the aggregate data mask two countervailing effects. First, the percentage of joint-payoff maximizing choices is significantly higher under strategic substitutes than under strategic complements. We argue that this difference is driven by the fact that it is less risky to cooperate under
substitutes than under complements. Second, choices of subjects in pairs that do not succeed in cooperating at the joint-payoff maximum tend to be lower (i.e. are less cooperative) under strategic substitutes than under strategic complements. We relate the latter result to non-equilibrium forces stemming from a combination of heterogeneity of subjects and differences in the slope of the response function between substitutes and complements.