Abstract
Does monitoring past conduct facilitate intertemporal cooperation? We designed an experiment characterized by strategic uncertainty and multiple equilibria where coordinating on the efficient outcome is a challenge. Participants, interacting anonymously in a group, could pay a cost either to obtain information about their counterparts, or to create a freely available public record of individual conduct. Both monitoring institutions were actively employed. However, groups were unable to attain higher levels of cooperation compared to a treatment without monitoring. Information about past conduct alone thus appears to be ineffective in overcoming coordination challenges.
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Notes
The expected duration of a cycle was about 14 rounds. Limiting records to 6 rounds allowed for some learning by insuring that an initial mistake would not permanently stain the reputation of a participant. In this sense, the design allows for a “fresh-start,” which gives players a chance to re-coordinate on cooperation after experimenting with defection choices. Another experiment with a similar stage game (Bigoni et al. 2014) studies a monitoring system that is costless, and that keeps track of the entire history of the subject during the cycle.
The Provision and Request treatments can be interpreted as introducing an institution that processes, respectively, the information truthfully provided by individuals in the group and all the available information; see Kandori (1992) for a similar interpretation. The institution marks individuals who have defected and the mark is publicly observable at no cost in one case (Provision), but not in the other (Request).
Details of the proof are available in the Supplementary Materials to Camera and Casari (2014).
With information provision, a buyer could report only the first defection observed and still generate an accurate record. Here we do not characterize the optimal strategy for providing information and for requesting information because it is beyond the scope of this study.
Data from the Baseline treatment are also analyzed in Camera and Casari (2014).
Epps and Singleton tests reveal that the distributions in Baseline and Information Provisions are statistically different (Baseline vs. Information Request, p value = 0.513; Baseline versus Information Provision, p value = 0.095; Information Provision vs. Information Request, p value = 0.167; n1 = n2 = 50 for each pairwise comparison).
Every participant observed a random number between 1 and 100 at the end of each period. A number below 94 meant that the cycle would continue into a new round. Theoretically, groups could have used this random number to coordinate on reverting to cooperation from a punishment phase triggered by a defection (Ellison 1994).
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Acknowledgements
We thank two anonymous referees for helpful comments, M. Bigoni for outstanding research assistance, N. Liu and T. Le for software coding, as well as seminar participants at several universities and conferences for comments on an earlier version of this paper. G. Camera acknowledges research support from the NSF Grant DMS-0437210.
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Camera, G., Casari, M. Monitoring institutions in indefinitely repeated games. Exp Econ 21, 673–691 (2018). https://doi.org/10.1007/s10683-017-9532-5
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DOI: https://doi.org/10.1007/s10683-017-9532-5