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Social Coordination, Self-Image, and Cooperation in Investment Games

Evelyn Korn, Stephan Meisenzahl and Johannes Ziesecke

Applied Economics and Finance, 2015, vol. 2, issue 3, 145-154

Abstract: Why do people cooperate in social groups? This paper provides experimental evidence that the fear of losing the self-image as a norm-compliant player might be one explaining factor. To that end an investment game with a public-goods character is played in different institutional setups that vary in the possibility to build reputation as well as in the communication of potential social norms. In addition, it provides a model that explains participants' decisions based on an extension of the neoclassical model. It covers a trade-off between pure wealth maximization and the minimization of damage to the self-image of being compliant. Experimental results show that this tradeoff is important in those treatments that allow for reputation building. We conclude that the wish to ¡°do the right thing¡± can enhance cooperation in a socially stable environment.

Keywords: investment game; experiment; reputation; cooperation; norm compliance; institutional design (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:rfa:aefjnl:v:2:y:2015:i:3:p:145-154