Working Paper Series

Frédéric Schneider and Roberto A. Weber (2013), Working paper series / Department of Economics No. 130

Long-Term Commitment and Cooperation

Abstract

We study how the willingness to enter long-term bilateral relationships affects cooperation even when parties have little information about each other, ex ante, and cooperation is otherwise unenforceable. We experimentally investigate a finitely-repeated Prisoner's Dilemma, allowing players to endogenously select interaction durations. Consistent with prior research, longer interactions facilitate cooperation. However, many individuals avoid long-term commitment, with uncooperative types less likely to commit than conditional cooperators. Endogenously chosen long-term commitment yields higher cooperation rates (98% in one condition) than exogenously imposed commitment. Thus, the willingness to enter into long-term relationships provides a means for fostering - and screening for - efficient cooperation.

Keywords
Repeated games, cooperation, voluntary commitment

JEL Classification
C72, C92, D03

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