CeDEx Seminar - David Rojo Arjona (University of Leicester)

Choice Flexibility and Long-Run Cooperation

Log-run interaction theoretically supports full cooperation in social dilemmas among strangers. Yet, in experiments where a binary cooperate-defect task is repeated in-definitely, cooperation is infrequent. Does this extreme rigidity in choices interfere with the provision of economic incentives for cooperation? To find out, we contrast rigid to flexible settings where we allow also interior partial-cooperation choices. This merely adds inefficient equilibria without altering the efficiency frontier. Results show that flexibility boosts cooperation when shifting from zero to moderate cooperation levels can create enough surplus. This result is driven by a sharp decline in the number of free-riders, who are prevalent otherwise.