It’s Payback time: New Insights on Cooperation in the Repeated Prisoners’ Dilemma

VIRTUAL BEHAVIOURAL AND EXPERIMENTAL ECONOMICS RESEARCH SEMINAR

It’s Payback time: New Insights on Cooperation in the Repeated Prisoners’ Dilemma

(By Maria Bigoni, Marco Casari, Andrea Salvanti, Andrzej Skrzypacz, Giancarlo Spagnolo)

Abstract: Cooperation can be fragile and easily disrupted. In situations where trust has been breached, whether intentionally or unintentionally, rebuilding mutual confidence is essential. Here we focus on strategies for restoring cooperation after a defection and argue that restitution can be a particularly effective approach when communication is absent. Restitution involves "proposing" a return to cooperation by restoring gains lost from the breach. This gesture, which is a materially costly for the offender and rewarding for the offended party, works as a credible message. Furthermore, restitution can be seen as fair in repeated social dilemmas, as it closes the payoff gap created by the deviation and makes subjects even. We discuss the theoretical properties and empirical validity of restitution strategies in experiments on repeated social dilemmas with both perfect and imperfect monitoring. Our results indicate that theoretically restitution strategies are different from the memory-one strategies on which the experimental literature has mainly focused, and empirically they find robust support in the data.

The link for participation in the event is the following: https://fernuni.zoom.us/j/61604483707.