Covenants before the swords: The limits to efficient cooperation in heterogeneous groups

Christian Koch (Corresponding author), Nikos Nikiforakis, Charles Noussair

Publications: Contribution to journalArticlePeer Reviewed

Abstract

When agents derive heterogeneous benefits from cooperation, a tension between efficiency and equality often arises. This tension can impede agents’ ability to cooperate efficiently. We design a laboratory experiment, in which we investigate the capacity of communication and punishment, separately and jointly, to promote cooperation in such an environment. Our results reveal that cooperation and earnings are significantly greater when both communication and punishment (a sword) are possible than when only one is available. Both cooperation levels and earnings, however, still fall substantially below the maximum possible. The reason is that groups establish covenants, i.e. mutual contribution agreements, that tend to strike a compromise between efficiency and equality. The timing of communication is critical. A history of sanctioning substantially reduces the probability that groups subsequently establish a covenant. Overall, our findings indicate not only the benefits of early communication, but also some limits to efficient cooperation in heterogeneous groups.
Original languageEnglish
Pages (from-to)307-321
Number of pages15
JournalJournal of Economic Behavior & Organization
Volume188
DOIs
Publication statusPublished - Aug 2021

Austrian Fields of Science 2012

  • 502057 Experimental economics

Keywords

  • Communication
  • Punishment
  • Cooperation
  • Normative conflict
  • Heterogeneity
  • NORMATIVE CONFLICT
  • COORDINATION
  • SOCIAL PREFERENCES
  • PROVISION
  • ALTRUISTIC PUNISHMENT
  • PUBLIC GOOD GAMES
  • FAIRNESS
  • ENFORCEMENT
  • SELF-GOVERNANCE
  • COMMUNICATION

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