Do upfront investments increase cooperation? A laboratory experiment
Peer reviewed, Journal article
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Original versionEuropean Economic Review. 2021, 140 (November), 1-26. 10.1016/j.euroecorev.2021.103779
In this paper, we experimentally investigate whether decentralized upfront investments increase cooperation in settings where there is no enforcement mechanism and cooperation is not easily sustained voluntarily. Such investments are a cost that individuals incur before deciding whether to cooperate or not, and increase the payoff resulting from the choice to cooperate. We study whether the effect of investments on cooperation depends on the investments being voluntary or mandatory. While cooperation rarely emerges spontaneously when investments are not possible, we show that introducing investment opportunities boosts overall cooperation levels. If investments are low and voluntary, cooperation is lower than when the same investments are mandatory. For high investments, cooperation is not significantly different between the two conditions. This is consistent with low investments being interpreted as a signal for unwillingness to cooperate, triggering non-cooperative choices.