Georg Kirchsteiger, ECARES, Universite Libre de Bruxelles, Belgium, CEPR, CESifo, and VCEE – Københavns Universitet

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Økonomisk Institut > Microeconomics > Seminars > Georg Kirchsteiger, EC...

Georg Kirchsteiger, ECARES, Universite Libre de Bruxelles, Belgium, CEPR, CESifo, and VCEE

"Endogenous Repeated Cooperation and Surplus Distribution - An Experimental Analysis"

Abstract

This paper investigates how endogenous group formation combined with the possibility of repeated interaction impacts cooperation levels and surplus distribution. We developed and tested experimentally a Surplus Allocation Game where the cooperation of four agents is needed to produce a surplus, but only two agents have the power to allocate it among the members of the group. Different matching procedures were used to test the impact of exogenous vs. endogenous group formation.

Contrary to commonly hold beliefs, the possibility of repeated interaction with the same partners per se did not lead to higher average cooperation levels and more equal (on average) allocations of the surplus, but to a self-selection of agents into groups with different life-spans, correlated with both distributors’ and receivers’ behavior. We developed a behavioral model based on a few straightforward assumptions which captures the dynamics observed in the experimental data, sheds light into the rationales that drive the agents’ individual behavior, and allows us to understand how group duration is linked to different agents´ characteristics. Our model suggests that the most generous distributors are those acting for fear of rejection, rather than for true generosity. Moreover, the groups lasting the longest (and the most efficient ones) are those composed by this type of distributors and “undemanding” receivers.

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