CREED Double Seminar

1. Maria Bigoni (Bologna University, Italy): The Importance of Being Even: Restitution in the Repeated Prisoner’s Dilemma.
We explore the role of restitution as a means to restore cooperation in repeated social dilemmas. In contrast to the memory-one strategies on which the recent experimental literature has focused, restitution strategies “propose” returning to cooperation by restoring payoffs lost for a past breach. They can also be seen as “fair”, as they close the payoff gap created by deviations, making subjects even. We study metadata from experiments on finitely and infinitely repeated Prisoner’s Dilemma, with perfect and imperfect monitoring, and find evidence in support of these strategies in all these classes of games. We then study the theoretical properties and empirical validity of the simplest restitution strategy we could identify - termed Payback - in the imperfect monitoring environment of Fudenberg, Rand and Dreber (2012). Two “puzzling” findings - that Tit-for-Tat is common even though it is not an equilibrium strategy, and that risk dominance loses its predictive power compared to environments with perfect monitoring – disappear once Payback is accounted for.

2. Karine Nyborg (Oslo University, Norway): Moral motivation as a driver of polarization.
Moral motivation can stimulate voluntary provision of public goods. However, individuals may be reluctant to accept the burden of moral responsibility. We find that social interaction gradually reduces individuals’ perceived moral responsibility, thus lowering actual contributions. With income inequality, biased social learning of ethical views, and migration between social groups, the long-run equilibrium is highly segregated and polarized. Rich and poor individuals self-select into separate groups, while social learning confirms each individual’s limited moral responsibility. The result is minimal voluntary public good contributions. Tax-financed government provision of the public good does not yield similar polarization and segregation.

Link to paper.

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