Working Paper: NBER ID: w21934
Authors: James Andreoni; Michael A. Kuhn; Larry Samuelson
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.
Keywords: No keywords provided
JEL Codes: C92; D64; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Endogenous choice of stakes (D81) | Higher cooperation levels (C71) |
| Higher cooperation levels (C71) | Higher joint payoffs (C79) |
| Players choosing to start small (Z22) | More cooperation (C71) |
| Endogenous allocation of stakes (D51) | Higher earnings (J31) |
| Endogenous choice of stakes (D81) | Players' intentions affecting cooperation (C72) |
| Successful cooperative interactions (C71) | Reinforcement of cooperation (C71) |