Werner Raub (Utrecht University)

“Cooperation Through Investments in Repeated Interactions and Contractual Agreements: An Experimental Study”

Abstract. We investigate social organization of cooperation through repeated interactions and contractual agreements. We analyze effects of repeated interactions and of contractual agreements on cooperation as well as costly investments in establishing repeated interactions or contractual agreements in the first place. We derive hypotheses on investments and effects from game-theoretic models, including standard assumptions on game-theoretic equilibrium behavior as well as self-regarding preferences. We thus explore the limits of a rational choice approach in the spirit of Coleman by analyzing how social organization, namely, repeated interactions and contractual agreements, affect behavior as well as how such social organization emerges itself as a result of rational action. We find quite some support for our game-theoretic hypotheses on effects of repeated interactions and contractual agreements as well as on conditions such that actors invest in setting up repeated interactions and contractual agreements. In particular, our models imply a cost threshold for investments and experimental evidence supports that investments are more likely for low and medium costs that are both below the cost threshold, compared to high costs above the threshold. We also replicate evidence from earlier studies that cooperation is fostered by both repeated interactions as contractual agreements. We furthermore test conjectures that do not follow from standard game-theoretic assumptions. These are hypotheses on differences in the effects of low versus medium investment costs. We find less convincing support for these conjectures. Similarly, there is no convincing support for the conjecture, based on assumptions on the ‘size’ of coordination problems in different kinds of games, that actors might prefer to organize cooperation in social dilemmas via contractual agreements rather than repeated interactions.

Joint work with Anna Sokolova and Vincent Buskens