The Effects of Time Preferences on Cooperation: Experimental Evidence from Infinitely Repeated Games

Abstract

This paper studies the effects of time preferences on cooperation in an infinitely repeated prisoner’s dilemma game experiment. Subjects play repeated games in the lab, all decisions at once, but stage game payoffs are paid over an extended period of time. Changing the time window of stage game payoffs (weekly or monthly) varies discount factors, and a delay for the first-stage game payoffs eliminates/weakens present bias. First, subjects with weekly payments cooperate more than subjects with monthly payments—higher discount factors promote greater cooperation. Second, the rate of cooperation is higher when there is a delay—present bias reduces cooperation. (JEL C72, C73, D91)