Group Identity in Strategic Games in the Laboratory

We study the effects of group identity on cooperation in experimental two-person strategic games. Our results show that in games of strategic complements, group identity only matters initially when a participant interacts with another participant of the same group by delivering more cooperative choices, but this effect disappears in later rounds. The Nash equilibrium with standard preferences describes behavior well regardless of the identity condition. However, in treatments with strategic substitutes, we find that participants are persistently more competitive when playing with another participant of a different group than when there are no identity groups. This is because, in games of strategic substitutes, participants have spiteful preferences toward participants that are members of the another group which leads to choices that are more competitive than the Nash equilibrium.