Exploring cooperation and competition in the Centipede game through verbal protocol analysis

Abstract The Centipede game is an abstract model of reciprocal relationships in which two individuals alternate in helping each other at relatively small personal cost. Whereas mutual cooperation can benefit both individuals in the long run, a paradoxical but logically compelling backward induction argument suggests that cooperation is irrational. Empirical studies have reported reliable deviations from the non‐cooperative backward induction solution, but their exclusively quantitative methods allow only a limited range of predefined motives to be explored. Our study uses verbal (‘think aloud’) protocols and qualitative data analysis to identify motives for cooperation in the Centipede game. The results provide little evidence for sophisticated backward induction reasoning. Instead, a wide range of motives emerged, their relative saliences varying according to the stage of the game. Activity bias affected decisions mainly at the beginning of the game, whereas cooperative and altruistic social value orientations most frequently accounted for cooperation towards its natural end.