Sequential reciprocity in two-player, two-stage games: An experimental analysis

We experimentally test Dufwenberg and Kirchsteiger’s (2004) theory of sequential reciprocity in a sequential prisoner’s dilemma (SPD) and a mini-ultimatum game (MUG). Data on subjects’ behavior and firstand second-order beliefs allow us to classify their behavior as a material best response, a reciprocity best response, both, or none. In both games, about 80% of the first-movers’ behavior is a material best response, a reciprocity best response, or both. The remaining 20% of first-movers almost always make choices that are “too kind” according to the theory of reciprocity. Second-movers’ behavior, in both games, is fully in line with the predictions of the theory. Average behavior and beliefs, across subjects, are found to be compatible with a sequential reciprocity equilibrium in the SPD, but not in the MUG. We also found first- and second-order beliefs to be unbiased in the SPD, and nearly unbiased in the MUG, with the exception that first-movers in the MUG significantly overestimated the second-mover’s rejection rate of unequal offers.