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
Most markets are open to opportunistic behaviour
In line with the previous literature on partner choice, we find that the ability to choose one's partner increases earnings compared to random matching (e.g. Brekke et al, 2011; Hauge et al, 2019; Page et al, 2005)
We found that partner choice decreased the estimated probability of being left without a partner for cooperators compared to random matching, whereas it increased for free riders
Summary
Most markets are open to opportunistic behaviour. This allows free riders to benefit more than cooperative individuals by exploiting op portunities for short-term gain. When partnerships form through mutual consent, people tend to prefer those who keep their end of the bargain and shun those who do not. Those who fail to cooperate are left without a partner and may need to redeem themselves in future part nerships. Those who cooperate reap the benefits of future trade
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