Rational and Empirical Play in the Simple Hot Potato Game

We define a "hot potato" to be a good that may be traded a finite number of times, but which becomes a bad if and when it can no longer be exchanged. We describe a game involving such goods, and show that non-acceptance is a unique subgame perfect Nash equilibrium for rational egoists. Contrastingly, experiments with human subjects show willingness to accept such goods under a variety of conditions. Acceptance of the hot potato is positively related to payoff size and to the length of the remaining chain, but negatively related to the number of potential exchange partners. We find that subjects' behaviors are consistent with collectively oriented behavior, in contrast with their personal accounts. Implications for rational choice theory and economic sociology are discussed.