Is Adversity a School of Wisdom? Experimental Evidence on Cooperative Protection Against Stochastic Losses

Andreas Nicklisch, Sonja Köke and Andreas Lange

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: We investigate the dynamics of voluntary cooperation to either reduce the size or the probability of stochastic losses. For variants of a repeated four person prisoner’s dilemma game, we show that cooperation is larger and more stable when it affects the probability rather than the size of the adverse event. We provide crucial insights on behavioral adaptation: defecting players are more likely to switch to cooperation after experiencing an adverse event, while existing cooperation is reinforced when the losses do not occur. This behavior is consistent with simple learning dynamics based on ex post evaluations of the chosen strategy.

JEL-codes: C92 H41 Q54 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cdm and nep-exp
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145716

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