pair only if both subjects choose Y. Consequently, we will define the degree of
cooperation in the economy according to how many pairs cooperate.
The supergame. A supergame (or cycle, as we will call it) consists of an indefinite
interaction among subjects achieved by a random continuation rule, as first introduced by
Roth and Mangham (1978). A supergame that has reached period t continues into t + 1
with a probabilityδ∈ (0, 1) , so the interaction is of finite but uncertain duration. We
interpret the continuation probability δ as the discount factor of a risk-neutral subject.
The expected duration of a supergame is 1∕(1-δ) periods, and we set δ = 0.95, so in each
period the supergame is expected to go on for 20 (additional) periods.6 In our experiment
the computer drew a random integer between 1 and 100, using a uniform distribution, and
the supergame terminated with a draw of 96 or of a higher number. All session
participants observed the same number, and so it could have also served as a public
randomization device.
The experimental session. Each experimental session involved twenty subjects and
exactly five cycles. We built twenty-five economies in each session by creating five
groups of four subjects in each of the five cycles. This matching protocol across
supergames was applied in a predetermined, round-robin fashion. More precisely, in each
cycle each economy included only subjects who had neither been part of the same
economy in previous cycles nor were part of the same economy in future cycles. Subjects
did not know how groups were created but were informed that no two participants ever
interacted together for more than one cycle.
Participants in an economy interacted in pairs according to the following matching
protocol within a supergame. At the beginning of each period of a cycle, the economy
was randomly divided into two pairs. There are three ways to pair the four subjects and
each one was equally likely. So, a subject had one third probability of meeting any other
subject in each period of a cycle. For the whole duration of a cycle a subject interacted
6 With continuation probability δ, the expected number of periods is S = ∑n=1(1 -δ)δn-1n = 1/(1 -δ) .