Starting Small: Endogenous Stakes and Rational Cooperation

25 Pages Posted: 1 Feb 2016 Last revised: 7 Jun 2021

See all articles by James Andreoni

James Andreoni

University of California, San Diego (UCSD)

Michael Kuhn

University of Oregon - Department of Economics

Larry Samuelson

Yale University - Department of Economics; Yale University - Cowles Foundation

Date Written: January 2016

Abstract

We report experimental results for a twice-played prisoners’ dilemma in which the players can choose the allocation of the stakes across the two periods. Our point of departure is the assumption that some (but not all) people are principled to “do the right thing,” or cooperate, as long as their opponent is sufficiently likely to do so. The presence of such types can be exploited to enhance cooperation by structuring the twice-played prisoners’ dilemma to “start small,” so that the second-stage stakes are larger (but not too much larger) than the first-stage stakes. We compare conditions where the allocation of stakes is chosen exogenously to conditions where it is chosen by the players themselves. We show that players are able to find and choose the payoff maximizing strategy of starting small in a twice-played prisoners’ dilemma, and that the salutary payoff effects of doing so are larger than those that arise when the same allocation is exogenously chosen.

Suggested Citation

Andreoni, James and Kuhn, Michael and Samuelson, Larry, Starting Small: Endogenous Stakes and Rational Cooperation (January 2016). Available at SSRN: https://ssrn.com/abstract=2725712

James Andreoni (Contact Author)

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

HOME PAGE: http://econ.ucsd.edu/~jandreon/

Michael Kuhn

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

HOME PAGE: http://pages.uoregon.edu/mkuhn

Larry Samuelson

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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