Chapter 8: Cooperation in the social domain: prisoners’ dilemma and social interactions
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The standard economic utility function considers defection to be the dominant strategy in the prisoners’ dilemma. Yet, in experiments, cooperative behavior is often observed even in one-shot games. Recent research suggests that framing as well as the substantive domain, i.e. where decision-makers act, matters and impacts outcomes. In this chapter we investigate the role of the “social domain” in the prisoners’ dilemma setting and test it in the laboratory experiments conducted in New Zealand, Russia and the United States. Other than in a standard prisoners’ dilemma, in these experiments, participants can endogenously select themselves into the game by a bidding mechanism and they can be ostracized depending on the votes by other players. We identify significant markers of prosocial behavior in the game and its change with time and experience. Although entering the social circle and playing prisoners’ dilemma does not ensure a bigger profit, participants demand social interactions. We find that in the social domain cooperation rates are significant and grow with the increase in demand for social relationships, but decrease with experience.

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