Doctoral Dissertation in Economics: Voluntary Separation in Infinitely Repeated Prisoner's Dilemma Game: An Experiment

New York University, New York NY

Investigators

Abstract

Many economic and social relationships such as employment contracts, membership of voluntary organizations, international alliances, friendships and marriages feature voluntary separation: each participant can unilaterally and voluntarily exit the relationship. On the other hand, voluntary separation often makes it hard to build trust and long-term cooperation. Voluntary separation does not only change how business or social relationships end, it also governs the nature of relationships from the very beginning. Its effect on the level of cooperation will have a profound implication for economic growth, social cohesion and subjective well-being of individuals. This study experimentally investigates how voluntary separation affects cooperation. Cooperative behavior of subjects will be compared to theoretical predictions. Different social mechanisms will be tested for their effectiveness in inducing cooperation, which could help policy makers or community designers in their choice of regulatory options. In the experiment, subjects will interact repeatedly in a computer laboratory setting under costly and costless separation. The baseline treatment will not be allowing any separation at all. Theoretical studies on this class of strategic interactions yield predictions based on gradual trust building. In the equilibria they find, long-term cooperation is achieved by mutually defecting in the beginning. This is a highly counter-intuitive way of building trust. There is very little empirical/experimental evidence to support it. This study aims to fill the gap in the literature by answering the following questions: Under what circumstances do people cooperate? Does voluntary separation help or hurt cooperation? How do people achieve cooperation? To test the theoretical predictions, subjects' cooperative behavior will be compared across treatments. By comparing separation treatments, we can also find out which social mechanisms effectively facilitate cooperation. Finally, potential teaching/learning patterns and persistently heterogeneous behavior among subjects can shed light on formation of norms and socialization.