It Pays to Be Nice: The Benefits of Cooperating in Markets
37 Pages Posted: 6 Nov 2017 Last revised: 7 Dec 2017
Date Written: November 2, 2017
This paper contributes to the experimental literature by studying the causal effect of partner choice on the earnings of different cooperative types. We first elicit cooperative types, then randomly assign subjects to a repeated prisoner’s dilemma game with either 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. Results from two experiments show that partner choice allows cooperators and reciprocators to outperform free riders; cooperators and reciprocators earn more than free riders and are less frequently excluded.
Keywords: cooperation, commitment, partner choice, punishment
JEL Classification: D02, C91, C92
Suggested Citation: Suggested Citation