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Cooperating over losses and competing over gains: A social dilemma experiment

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  • Ispano, Alessandro
  • Schwardmann, Peter

Abstract

Evidence from studies in international relations, the politics of reform, collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains. To test whether the prospect of losses can induce cooperation, we let experimental subjects play the traveler's dilemma in the gain and loss domain. Subjects cooperate substantially more over losses. Furthermore, our results suggest that this treatment effect is best explained by reference-dependent risk preferences and reference-dependent strategic sophistication. We discuss the implications of our results and relate our findings to other experimental games played in the loss domain.

Suggested Citation

  • Ispano, Alessandro & Schwardmann, Peter, 2017. "Cooperating over losses and competing over gains: A social dilemma experiment," Games and Economic Behavior, Elsevier, vol. 105(C), pages 329-348.
  • Handle: RePEc:eee:gamebe:v:105:y:2017:i:c:p:329-348
    DOI: 10.1016/j.geb.2017.08.008
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    Cited by:

    1. Kaushik Basu, 2018. "Markets and Manipulation: Time for a Paradigm Shift?," Journal of Economic Literature, American Economic Association, vol. 56(1), pages 185-205, March.

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    More about this item

    Keywords

    Traveler's dilemma; Loss domain; Diminishing sensitivity; Strategic sophistication;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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