Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 12/18: It Pays to be Nice: The Benefits of Cooperating in Markets

Nina Serdarevic (), Eirik Strømland () and Sigve Tjøtta ()
Additional contact information
Nina Serdarevic: University of Bergen, Department of Economics, Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Eirik Strømland: University of Bergen, Department of Economics, Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Sigve Tjøtta: University of Bergen, Department of Economics, Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway

Abstract: This paper contributes to the experimental literature by examining the causal effect of partnerchoice 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-codes: C91; C92; D02

53 pages, September 13, 2018

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