Gallo, E., Riyanto, Y. E., Roy, N. and Teh, T-H

Cooperation and Punishment Mechanisms in Uncertain and Dynamic Social Networks

Games and Economic Behavior, forthcoming

Vol. 134 pp. 75-103 (2022)

Abstract: This paper examines experimentally how reputational uncertainty and the rate of change of the social environment determine cooperation. Reputational uncertainty significantly decreases cooperation, while a fast-changing social environment only causes a second-order qualitative increase in cooperation. At the individual level, reputational uncertainty induces more leniency and forgiveness in imposing network punishment through the link proposal and removal processes, inhibiting the formation of cooperative clusters. However, this effect is significant only in the fast-changing environment and not in the slow-changing environment. A substitution pattern between network punishment and action punishment (retaliatory defection) explains this discrepancy across the two social environments.

Keywords: Cooperation, Experiments, Prisoner's dilemma, Uncertainty, Repeated games, Networks

JEL Codes: C72, C73, C92, D81, D85

Author links: Edoardo Gallo  

Publisher's Link: https://doi.org/10.1016/j.geb.2022.03.015