The Importance of Being Even: Restitution and Cooperation
42 Pages Posted: 30 Apr 2024 Last revised: 1 May 2024
Date Written: April 26, 2024
Abstract
We study – empirically and theoretically – how restitution helps restore cooperation. After a breach, restitution strategies “propose” returning to cooperation by cooperating against defection, and condition actions on the balance between the cooperation given and received. We reanalyze experimental data from three classes of repeated games and find compelling empirical support for restitution strategies in general and for a strategy we named Payback in particular. Considering restitution strategies enables to resolve discrepancies between theory and experiments emerging from prior literature - such as the prevalent use of non-equilibrium strategies like Tit-for-tat - and questions the predominance of memory-one strategies.
Keywords: Asymmetric strategies, laboratory experiments, social dilemmas, indefinitely repeated games
JEL Classification: C72, C73, C91, D82
Suggested Citation: Suggested Citation