Long-Term Commitment and Cooperation

University of Zurich Department of Economics Working Paper No. 130

58 Pages Posted: 6 Oct 2013

See all articles by Frédéric Schneider

Frédéric Schneider

University of Cambridge - Judge Business School

Roberto A. Weber

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 30, 2013

Abstract

We study how the willingness to enter long-term bilateral relationships affects cooperation even when parties have little information about each other, ex ante, and cooperation is otherwise unenforceable. We experimentally investigate a finitely-repeated Prisoner’s Dilemma, allowing players to endogenously select interaction durations. Consistent with prior research, longer interactions facilitate cooperation. However, many individuals avoid long-term commitment, with uncooperative types less likely to commit than conditional cooperators. Endogenously chosen long-term commitment yields higher cooperation rates (98% in one condition) than exogenously imposed commitment. Thus, the willingness to enter into long-term relationships provides a means for fostering - and screening for - efficient cooperation.

Keywords: Repeated games, cooperation, voluntary commitment

JEL Classification: C72, C92, D03

Suggested Citation

Schneider, Frédéric and Weber, Roberto A., Long-Term Commitment and Cooperation (September 30, 2013). University of Zurich Department of Economics Working Paper No. 130. Available at SSRN: https://ssrn.com/abstract=2334376 or http://dx.doi.org/10.2139/ssrn.2334376

Frédéric Schneider (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Roberto A. Weber

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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