The name is absent

Cooperation among strangers:
an experiment with indefinite interaction

Gabriele Camera

Purdue University
and

Marco Casari
Purdue University

June 2007

Abstract

We study the emergence of norms of cooperation in experimental economies
populated by strangers interacting indefinitely and lacking formal enforcement
institutions. In all treatments the efficient outcome is sustainable as an equilibrium. We
address the following questions: can these economies achieve full efficiency? Which
institutions for monitoring and enforcement promote cooperation? Finally, what classes
of strategies are employed to achieve high efficiency? We find that, first, cooperation
can be sustained even in anonymous settings; second, some type of monitoring and
punishment institutions significantly promote cooperation; and, third, subjects dislike
indiscriminate strategies and prefer selective strategies.

Keywords: experiments, repeated games, cooperation, equilibrium selection,
prisoners’ dilemma, random matching

JEL codes: C90, C70, D80

(*) Correspondence address: Camera ([email protected]); Casari ([email protected]), Krannert
School of Management, Purdue University, 403 W. State St., West Lafayette, IN 47907, USA. Financial
support for running the experiments was provided by Purdue’s CIBER. Camera acknowledges research
support from NSF grant.no. DMS-0437210. We thank Jingjing Zhang for valuable research assistance, and
we thank for comments Michael Baye, John Duffy, Jason Abrevaya, Thomas Palfrey, as well as seminar
participants at the Chicago ES meeting, Montreal ESA meeting, and Indiana University.

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