It Pays to Be Nice: The Benefits of Cooperating in Markets
51 Pages Posted: 6 Nov 2017 Last revised: 23 Sep 2018
Date Written: September 13, 2018
This paper contributes 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. This design allows us to study the causal effect of partner choice on earnings and exclusion. The results from two experiments show that partner choice allows cooperators to outperform free riders, cooperators earn more than free riders, and cooperators are less frequently excluded.
Keywords: cooperation, commitment, partner choice, punishment
JEL Classification: D02, C91, C92
Suggested Citation: Suggested Citation