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Do the Selfish Mimic Cooperators? Experimental Evidence from Finitely-Repeated Labor Markets

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Author Info
Roe, Brian E. () (Ohio State University)
Wu, Steven Y. () (Purdue University)

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Abstract

Experimental studies have consistently shown that cooperative outcomes can emerge even in finitely repeated games. Such outcomes are justified by existing reputation building models, which suggest that cooperative outcomes can be sustained if some subjects have other-regarding preferences. While the existence of other-regarding preferences is typically used to justify experimental outcomes, we are unaware of empirical studies that explicitly examine the interaction between cooperators (those with other-regarding preferences) and selfish subjects in sustaining cooperation. In this paper, we classify subjects as either selfish or cooperative using simple social preference games and then test for behavioral differences between the two types in a finitely-repeated labor market with unenforceable worker effort. Theory predicts, and our data confirms, that (1) selfish players mimic the actions of cooperators when trading partners can track the individual reputation of past partners and (2) selfish and cooperative types act differently when individual reputations cannot be tracked.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4084.

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Length: 37 pages
Date of creation: Mar 2009
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Handle: RePEc:iza:izadps:dp4084

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Related research
Keywords: contracts; relational contracts; implicit contracts; market interaction; experimental economics; repeated transaction; social preferences; reputation; firm latitude; finitely-repeated games;

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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    Other versions:
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  4. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series 1042, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  5. Burks, Stephen V. & Carpenter, Jeffrey P. & Verhoogen, Eric, 2003. "Playing both roles in the trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 195-216, June. [Downloadable!] (restricted)
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  11. Paul J. Healy, 2007. "Group Reputations, Stereotypes, and Cooperation in a Repeated Labor Market," American Economic Review, American Economic Association, vol. 97(5), pages 1751-1773, December. [Downloadable!]
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  12. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May. [Downloadable!] (restricted)
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  14. Guth, Werner & Huck, Steffen & Muller, Wieland, 2001. "The Relevance of Equal Splits in Ultimatum Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 161-169, October. [Downloadable!] (restricted)
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