An exploration of reputation formation in experimental games

This paper presents results from experiments with finitely repeated games with complete and incomplete information. We use two treatment variables: the number of rounds the game is played and the value of the probability that reflects the presence of incomplete information. We explore whether shorter games lead to results closer to the sequential equilibrium prediction than longer games. The behavior we observe deviates from the precise rules of behavior implied by the notion of sequential equilibrium. Behavior in some of the shorter games deviates even more from the sequential equilibrium prediction than that in longer games. A very general notion of reputation formation does capture most of the qualitative features of the data. (C) 2003 Elsevier Science B.V. All rights reserved.