cheated her in previous encounters, but cooperated with everyone else. This is remarkable
because the power of a targeted strategy (punish the culprit only) is lower than that of a
global strategy (punish everyone as soon as one sees a defection); the latter strategy
immediately triggers an economy-wide defection, and as a result incorporates a bigger
threat.21 In fact our data suggest that the threat of economy-wide defection has low
credibility. For instance, when economy-wide defection was the only available threat to
support a cooperative outcome (private monitoring treatment), we observed the lowest
levels of cooperation in all treatments in period 1. This result indicates that subjects may
doubt that a single defection will trigger an economy-wide punishment.
We derived some possible reasons for the frequent use of some classes of strategies.
First, subjects may have other-regarding preferences,22 in which case they would prefer
punishment schemes that decreased the harm to cooperators while raising it for defectors.
This attitude would suggest a strong preference for targeted strategies over reactive or
global strategies, and therefore, a reluctance to engage in economy-wide defection.
Second, subjects may prefer simpler strategies because of cognitive costs.23 The results
obtained provide mixed evidence on this point. A grim-trigger reactive strategy may be
the simplest choice available because it requires knowledge of the outcome only in the
current period and only in the subject’s match. Other strategies may involve a higher
cognitive cost because they require the monitoring of identities, as when strategies are
targeted, or of outcomes in other matches. Another dimension of complexity could be
time-dependence as in t-period punishment strategies, which are not observed. In public
monitoring treatments t-period punishment strategies are feasible and deliver higher
continuation payoff. Self-regarding agents, and even more so other-regarding agents,
should prefer t-period punishment to grim trigger strategies. Yet, punishment following a
21 If power is a criterion to select strategies, then in the anonymous public monitoring everyone should use
a global strategy, which is not observed. In the non-anonymous public monitoring one should observe that
a defector is punished by everyone in every future match, which is not observed.
22 There is an experimental literature that validates this conjecture (e.g., see Fehr and Gaecther, 2002) and
several models of other-regarding preferences exists that alternatively focus on: altruism,inequality
aversion or reciprocity (see Sobel, 2005 for a review).
23 The economies included just four subjects, and information was clearly displayed and easily accessible.
So, one can hardly argue that monitoring identities and histories was a demanding task.
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