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Better stuck together or free to go? Of the stability of cooperation when individuals have outside options

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  • Gaudeul, Alexia
  • Crosetto, Paolo
  • Riener, Gerhard

Abstract

How do outside options affect cooperation? We examine the stability of cooperation and the reasons for exit in public projects with stochastic outcomes, imperfect monitoring and an exit option. We find that treatments with high barriers to exit generate higher welfare overall as they foster stability and prevent inefficient separation of pairs. There is excessive exit in treatments with low barriers to exit, driven in part by an overestimate of the likelihood that the peer will leave and a desire not to be left alone in the public project. We contrast long-term “strategic” and short-term “egoistic” drivers of exit and find that short-term cost-benefit considerations play a more important role in treatments with lower barriers to exit.

Suggested Citation

  • Gaudeul, Alexia & Crosetto, Paolo & Riener, Gerhard, 2017. "Better stuck together or free to go? Of the stability of cooperation when individuals have outside options," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 99-112.
    • Handle: RePEc:eee:joepsy:v:59:y:2017:i:c:p:99-112
    DOI: 10.1016/j.joep.2017.01.005
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    1. Di Guida, Sibilla & Han, The Anh & Kirchsteiger, Georg & Lenaerts, Tom & Zisis, Ioannis, 2020. "Endogenous Group Formation and its impact on Cooperation and Surplus Allocation - An Experimental Analysis," Discussion Papers on Economics 8/2020, University of Southern Denmark, Department of Economics.
    2. Wilson, Alistair J. & Wu, Hong, 2017. "At-will relationships: How an option to walk away affects cooperation and efficiency," Games and Economic Behavior, Elsevier, vol. 102(C), pages 487-507.
    3. Sibilla Di Guida & The Anh Han & Georg Kirchsteiger & Tom Lenaerts & Ioannis Zisis, 2021. "Repeated Interaction and Its Impact on Cooperation and Surplus Allocation—An Experimental Analysis," Games, MDPI, vol. 12(1), pages 1-19, March.

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    More about this item

    Keywords

    Beliefs; Cooperation; Exit; Outside option; Public goods; Stability;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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