>It has sometimes been argued that the Nash prediction in the finitely repeated prisoner’s dilemma (and in many other environments) is counterintuitive and at odds with experimental evidence. However, experimental tests of the equilibrium hypothesis are typically conducted with monetary payoffs, which need not reflect the preferences of subjects over action profiles. In other words, individual preferences over the distribution of monetary payoffs may not be exclusively self-interested. Furthermore, the equilibrium prediction relies on the hypothesis that these preferences are commonly known to all subjects, which is also unlikely to hold in practice.To address this latter concern, the concept of Nash equilibrium has been generalized to allow for situations in … Continue reading >Rajiv Sethi