Division of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 Cooperation without Immediate Reciprocity: an Experiment in Favor Exchange

This paper presents experimental evidence concerned with behavior in indefinite horizon two-person dynamic favor exchange games. Subjects interact in pairs in continuous time and occasionally one of them receives opportunity to provide a favor to her partner. The effects of changing the benefit of receiving a favor and the arrival rate of opportunities to do a favor are studied when the opportunities are privately observed. Also considered are the impacts of informational access to partner’s opportunities on efficiency and the overall behavior of individuals with respect to “obvious” state variables. JEL classification numbers: C72, C73, C91, C92, D82