Cooperative protection against stochastic losses: Experimental evidence on behavioral dynamics.

Abstract

We investigate the dynamics of voluntary cooperation in stochastic social dilemmas. In variants of a repeated four-person prisoner's dilemma game, we show that cooperation rates are larger and more stable when cooperation affects the probability rather than the size of a damage event. We provide insights into behavioral adaptation: after experiencing a damage event, defecting players are more likely to switch to cooperation, while cooperating players are less likely to continue cooperating. In contrast, the absence of damage reinforces the initially chosen strategies. This behavior is consistent with simple learning dynamics based on ex post evaluations of the chosen strategy.