It Pays to Be Nice: The Benefits of Cooperating in Markets
94 Pages Posted: 6 Nov 2017 Last revised: 5 Feb 2020
Date Written: July 5, 2019
We contribute to the experimental literature by examining the causal effect of partner choice opportunities on the earnings of different cooperative types. We first elicit cooperative types and then randomly assign subjects to a repeated prisoner’s dilemma game, with either mutual partner choice or random matching. In each round, the individual who fails to attain a partner is excluded from the group. The results from three experiments show that mutual partner choice enables cooperators to outperform free riders; cooperators tend to earn more than free riders and are less frequently excluded. Our findings are robust with respect to varying group size and whether subjects are reminded about their entire or only their recent partner and contribution history.
Keywords: cooperation; endogenous partner choice; preference evolution
JEL Classification: D02, C91, C92
Suggested Citation: Suggested Citation