Abstract
How do outside options affect cooperation? We examine the stability of cooperation and the reasons for exit in public projects with stochastic outcomes, imperfect monitoring and an exit option. We find that treatments with high barriers to exit generate higher welfare overall as they foster stability and prevent inefficient separation of pairs. There is excessive exit in treatments with low barriers to exit, driven in part by an overestimate of the likelihood that the peer will leave and a desire not to be left alone in the public project. We contrast long-term “strategic” and short-term “egoistic” drivers of exit and find that short-term cost-benefit considerations play a more important role in treatments with lower barriers to exit.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
