Cooperation and punishment mechanisms in uncertain and dynamic social networks
46 Pages Posted: 16 Jan 2020 Last revised: 1 Mar 2022
Date Written: December 30, 2019
Abstract
This paper examines experimentally how reputational uncertainty and the rate of change of the social environment determine cooperation. Reputational uncertainty significantly decreases cooperation, while a fast-changing social environment only causes a second-order qualitative increase in cooperation. At the individual level, reputational uncertainty induces more leniency and forgiveness in imposing network punishment through the link proposal and removal processes, inhibiting the formation of cooperative clusters. However, this effect is significant only in the fast-changing environment and not in the slow-changing environment. A substitution pattern between network punishment and action punishment (retaliatory defection) explains this discrepancy across the two social environments.
Keywords: Cooperation, experiments, prisoner's dilemma, uncertainty, repeated games, networks
JEL Classification: C72, C73, C92, D81, D85
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