It Pays to be Nice: The Benefits of Cooperating in Markets
Journal article, Peer reviewed
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Original versionJournal of Behavioral and Experimental Economics. 2021, 90, 101595 https://doi.org/10.1016/j.socec.2020.101595
We contribute to the experimental literature by examining the causal effect of partner choice 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 period, the individual who fails to attain a partner is excluded from the group. The results from three experiments show that mutual partner choice enables cooperators to outperform free riders; cooperators tend to earn more than free riders and are less frequently excluded. Our findings are robust with respect to varying group size and whether subjects are reminded about their entire partner and earnings history or only their recent history.