Spheres of Influence in Multigame Contact

Abstract

We study the effect of multigame contact in asymmetric prisoner's dilemma games. Players simultaneously play two games either with the same partner (multigame contact) or with different partners (single-game contact). Asymmetry arises because one game is more valuable to one player, while the other game matters more to the other player. Efficiency requires coordination on “spheres of influence”: each player concedes in the game valued by the other in exchange for gains in their own priority game. Our experiments show that such equilibria enable players to realize the efficiency gains that theory predicts for multigame contact, contrasting with earlier experimental studies that found no such gains. The results suggest that as firms expand across markets, collusion may emerge through spheres of influence rather than market-by-market coordination.

Joint paper with Niclas Kongstad, Joao Montez and Christian Thoeni.