The Role of Payoff Parameters for Cooperation in the One-Shot Prisoner's Dilemma

Simon Gächter, Kyeongtae Lee, Martin Sefton () and Till O. Weber ()
Additional contact information
Kyeongtae Lee: Bank of Korea
Martin Sefton: University of Nottingham
Till O. Weber: Newcastle University

No 16814, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The prisoner's dilemma (PD) is arguably the most important model of social dilemmas, but our knowledge about how a PD's material payoff structure affects cooperation is incomplete. In this paper we investigate the effect of variation in material payoffs on cooperation, focusing on one-shot PD games where efficiency requires mutual cooperation. We report results from three experiments (N = 1,993): in a preliminary experiment, we vary the payoffs over a large range. In our first main experiment (Study 1), we present a novel design that varies payoffs orthogonally in a within-subjects design. Our second main experiment, Study 2, investigates the orthogonal variation of payoffs in a between-subjects design. In a complementary analysis we also study the closely related payoff indices of normalized loss and gain, and the K-index. The most robust finding of our experiments and the complementary analyses is that cooperation in a PD increases with the gains of mutual cooperation over mutual defection.

Keywords: normalized loss; normalized gain; efficiency; risk; temptation; payoff parameters; cooperation; prisoner's dilemma; K-index; experiments (search for similar items in EconPapers)
JEL-codes: A13 C91 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2024-02
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
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Published - revised version published in: European Economic Review , 2024, 166, 104753,

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Journal Article: The role of payoff parameters for cooperation in the one-shot Prisoner's Dilemma (2024)
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