Abstract This paper shows that collusive behavior of firms in production with lump-sum payment licensing may occur in an infinitely repeated duopoly if both firms adopt a two-period strategy to interact with each other. It is profitable for the patent-holding firm with non-drastic cost-reducing innovation to use licensing as a strategic means to induce the opponent to cooperate in pursuit of joint profit. It is proved that there exists a Pareto dominant two-period strategy profile, which is an equilibrium in both equilibrium and out-of-equilibrium paths. Furthermore, it is shown that the duration of punishment while two firms are in the out-of-equilibrium is endogenously determined.

<p>This dissertation is a collection of three papers, each one being a chapter. The running subject of interest in all the papers is the strategic behavior of individuals in different environments. In the first chapter, I experimentally investigate collusive behavior under simultaneous interaction in multiple strategic settings, a phenomenon which I call multiple contacts. I investigate how multiple contacts impact collusive behavior when the players are symmetric or asymmetric. The second chapter is a joint work with Dr. Brian Roberson. In this chapter, we examine the role of cognitive diversity in teams on performance in a large innovation contest setting. We use a theoretical model to derive conditions under which increasing diversity can improve the performance in the large contest. Finally, in the third chapter, a joint work with Dr. Yaroslav Rosokha and Dr. Masha Shunko, we experimentally study players' behavior when they interact in an infinitely repeated environment, where the state of the world in each period is stochastic and dependent on a transition rule. Our main questions are how the transition rule impacts behavior and whether asymmetry in players impacts this.</p> <p><br></p> <p>In the first chapter, I study the phenomenon of multiple contacts using a laboratory experiment with multiple symmetric or asymmetric prisoners' dilemma games. When agents interact in multiple settings, even if defection or deviation from collusion in one setting can not be credibly punished in the same setting, it may be punishable in other settings. This can increase the incentive to collude. I observe a statistically significant increase in probability of punishment in one game after defection in another game under multiple contacts, but only when the games are asymmetric in payoffs. While punishment of defection increases in some situations, I do not find any significant increase in collusion due to multiple contacts in either symmetric or asymmetric environment. In addition to this result, to find further support for the theory which suggests that agents should use different strategies under multiple contacts, I estimate the underlying strategies that subjects use in my experiment. To this end, I modify popular strategies (e.g., Grim Trigger, Tit-for-Tat, etc.) to condition on the history observed in multiple strategic settings. I find that only for games with asymmetric payoffs subjects use these modified strategies in the presence of multiple contacts.</p> <p><br></p> <p>The second chapter is a theoretical work. In our model of large team innovation contest, teams develop an innovation using the skills or perspectives (tools) belonging to individual team members and the costly effort they provide.</p> <p>Prizes are awarded based on the values of the teams' innovations. Within a team, the team members posses different skills or perspectives (tools) which may be applied to innovation problems. For a given innovation problem and a given level of team effort, different combinations of tools within a team may generate different values for the team innovation. In this context, we examine the issues of individual team performance as a function of a team's own composition and the overall performance of the contest as a function of the compositions of the teams. We find that the question of whether increasing diversity leads to an increase in expected performance, for both an individual team and the overall contest, depends on the efficiency with which teams are able to effectively apply diverse sets of tools to innovation problems. Thus, our paper provides a channel -- other than a direct cost of diversity -- through which diversity can be beneficial or detrimental depending on how efficient teams are at utilizing diverse sets of team member tools.</p> <p><br></p> <p>The final chapter is another experimental study. We study an enviroment where individuals interact with each other in a prisoners' dilemma game repeatedly over time. However, the payoffs of the prisoners' dilemma game is decided stochastically using a transition rule. We vary the transition rule from alternation to random and study the change in subject behavior when the interaction is either symmetric or asymmetric. Our results show that in asymmetric environment, alternation can improve cooperation rates.</p> <p>With random transition rule, symmetric environment is more conducive to cooperation. We find that asymmetric environment with random transition rules performs the worst in terms of cooperation rates.</p>