We then built on this initial finding by studying if and how the introduction of some
prototypical institutions, capable of reducing either informational or enforcement
frictions, would impact the emergence of cooperation (private monitoring with
punishment, anonymous public monitoring, non-anonymous public monitoring
treatments). According to theory, none of these institutions alters the lower or upper
bound of cooperation possible in equilibrium. Yet, they had a remarkable impact on
cooperation levels observed in the experiment.
In some treatments we increased the available information by displaying the histories
of actions of everyone in the economy (public monitoring). Such information sometimes
had no effect on aggregate cooperation levels and sometimes had startling effects. It turns
out that unless histories could be traced back to a specific individual, this additional
information was not used. In the anonymous public monitoring treatment, subjects
received aggregate information about histories in the economy, but failed to exploit the
information to increase cooperation above the private monitoring treatment. Instead,
when details about identities were added to this aggregate information (non-anonymous
public monitoring), cooperation was considerably higher. Second, in some treatments
subjects had the costly option to lower the opponent’s payoff. In this personal punishment
treatment cooperation levels increased so dramatically that they are statistically
indistinguishable from the non-anonymous public monitoring treatment.
Another main contribution of the paper is to shed light on the classes of strategies
employed by subjects who indefinitely play a prisoners’ dilemma. The subjects’ behavior
in our experimental economies suggests a strong preference for strategies that are
selective in punishment (i.e., a preference for narrowing down the sets of targets of
punishment). Indeed, when strategies with different levels of selectivity were available,
subjects invariably chose the one with the most selective punishment. For example, when
subjects remained anonymous but could see all histories in the economy, the
representative subject mostly defected only after having directly experienced a defection
(reactive strategy). When subjects could also see individual identities, then the
representative subject essentially targeted her punishment toward those who directly
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