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The Role of Payoff Parameters for Cooperation in the One-Shot Prisoner's Dilemma

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  • Gächter, Simon

    (University of Nottingham)

  • Lee, Kyeongtae

    (Bank of Korea)

  • Sefton, Martin

    (University of Nottingham)

  • Weber, Till O.

    (Newcastle University)

Abstract

The prisoner's dilemma (PD) is arguably the most important model of social dilemmas, but our knowledge about how a PD's material payoff structure affects cooperation is incomplete. In this paper we investigate the effect of variation in material payoffs on cooperation, focusing on one-shot PD games where efficiency requires mutual cooperation. We report results from three experiments (N = 1,993): in a preliminary experiment, we vary the payoffs over a large range. In our first main experiment (Study 1), we present a novel design that varies payoffs orthogonally in a within-subjects design. Our second main experiment, Study 2, investigates the orthogonal variation of payoffs in a between-subjects design. In a complementary analysis we also study the closely related payoff indices of normalized loss and gain, and the K-index. The most robust finding of our experiments and the complementary analyses is that cooperation in a PD increases with the gains of mutual cooperation over mutual defection.

Suggested Citation

  • Gächter, Simon & Lee, Kyeongtae & Sefton, Martin & Weber, Till O., 2024. "The Role of Payoff Parameters for Cooperation in the One-Shot Prisoner's Dilemma," IZA Discussion Papers 16814, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16814
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    More about this item

    Keywords

    normalized loss; normalized gain; efficiency; risk; temptation; payoff parameters; cooperation; prisoner's dilemma; K-index; experiments;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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