Abstract
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.
Highlights
Do nice guys finish last? As most market exchanges are open to opportunistic behavior, free riders can benefit over cooperative individuals by exploiting opportunity for short-term gains
Result 2: Partner choice rewards subjects classified as cooperators and punishes subjects classified as free riders
Our two experiments show that partner choice rewards cooperators and reciprocators but punishes free riders
Summary
Do nice guys finish last? As most market exchanges are open to opportunistic behavior, free riders can benefit over cooperative individuals by exploiting opportunity for short-term gains. markets typically involve the opportunity for partner choice. Increasing the group size and limiting the private information to only the current period shapes the design toward a more standard random matching procedure: the probability of meeting the same partner in the Random treatment of Experiment 2 is lowered compared to Experiment 1.8 in larger groups, it is more difficult for the subjects to keep track of the ID tags of their previous partners. Both experiments show that cooperative individuals earn more and are less likely to be excluded in the Choice treatment than in the Random treatment.
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