CeDEx Seminar - Felix Kölle (University of Cologne)

Cooperation, Discounting, and the Effects of Delayed Benefits

Abstract:

Collective action problems are ubiquitous in nature and exist at all levels in human society. Numerous studies have investigated the determinants of cooperation in social dilemma situations. Yet, one forgotten factor in all of these studies is that in many of the real-world problems of cooperation (e.g. global warming), the costs of cooperation are immediate while the rewards from cooperation are delayed. Since most people exhibit a present bias, incentives for cooperation are additionally weakened leading to lower predicted social efficiency. In this study, we provide the first systematic analysis of how time preferences and the effect of delayed benefits affects cooperation within groups. We find that people become less conditional cooperative and more pessimistic about other’s contributions if the rewards from cooperation are delayed. On average the cooperation rate drops by about 50%. Economic incentives (in terms of mpcr) have to be raised by about 92% to achieve the same cooperation levels as without delay.