Achieving efficient outcomes in the Prisoner’s Dilemma game: explicit instructions and extreme punishment

Pablo Guillen, Archer Kirk and Lokendra Nedunuri

No 2024-10, Working Papers from University of Sydney, School of Economics

Abstract: We use an online experiment to test the effect of an extreme kind of altruistic punishment, labelled hereafter Mutually Assured Destruction (MAD), on cooperation. We study the effect of MAD punishment under both symmetric and asymmetric versions of a Prisoners’ Dilemma (PD) game. Participants were asked to read explicit instructions, in which the outcomes of the PD game were explained in detail. Their understanding was then thoroughly tested by a battery of test questions. In order to rule out any fraudulent participation, those who failed to provide correct answers were excluded from participation, which resulted in relatively high attrition. The availability of MAD punishment dramatically increased cooperation. That resulted on efficiency gains, compensating for the rare instances of destructive punishment, in the symmetric treatment. We conclude that the threat of extreme forms of altruistic punishment might be likely at play in many real-life social dilemma situations.

Date: 2024-06
New Economics Papers: this item is included in nep-exp and nep-gth
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