Endogenous Reputation Formation Under the Shadow of the Future
85 Pages Posted: 29 Jan 2015 Last revised: 14 Jul 2017
Date Written: July 10, 2017
Recent research has shown that making people’s decisions known to others may enhance cooperation in infinitely repeated prisoner’s dilemma games with random matching. This paper experimentally studies whether people can cooperate with each other by endogenously showing their identities and building cooperative reputations when there is an option to hide the identities. Our experiment shows that a non-negligible fraction of subjects choose to conceal their identities and accordingly subjects fail to cooperate with each other in communities if hiding is cost-free. However, almost all subjects disclose their identities and successfully achieve cooperation if a cost is charged for the act of hiding. This finding has a broad methodological implication for the study of reputation mechanisms when infinitely repeated games are used in an experiment, as people’s behavior may be determined by their ability to hide identities.
Keywords: experiment, cooperation, prisoner dilemma game, infinitely-repeated games, reputation
JEL Classification: C73, C92, D70
Suggested Citation: Suggested Citation