Inefficient Cooperation under Stochastic and Strategic Uncertainty
Lisa Bruttel (),
Werner Güth (),
Juri Nithammer () and
Andreas Orland ()
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Werner Güth: LUISS Guido Carli, Max Planck Institute for Research on Collective Goods
Juri Nithammer: University of Potsdam
No 20, CEPA Discussion Papers from Center for Economic Policy Analysis
Stochastic uncertainty can cause difficult coordination problems that may hinder mutually beneficial cooperation. We propose a mechanism of ex-post voluntary transfers designed to circumvent these coordination problems and ask whether it can do so. To test this, we implement a controlled laboratory experiment based on a repeatedly played Ultimatum Game with a stochastic endowment. Contrary to our hypothesis, we find that allowing voluntary transfers does not entail an efficiency increase. We suggest and analyze two main reasons for this finding: First, the stochastic uncertainty forces proposers to accept high strategic uncertainty if they intend to cooperate by claiming a low amount (which many proposers do not). Second, many responders behave only incompletely conditionally cooperative by transferring too little (which hinders cooperation in future periods).
Keywords: stochastic uncertainty; strategic uncertainty; cooperation; Ultimatum Game; experiment (search for similar items in EconPapers)
JEL-codes: C78 C92 D74 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-gth and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pot:cepadp:20
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