Working Paper, Brown University, Department of Economics 2015-9
Reputation is a commonly cited check on opportunism in economic and social interactions. But it is often unclear what would motivate an agent to report another's behavior when the pool of potential partners is large and it is easy enough for an aggrieved player to move on. We argue that behavioral or social preference motivations may solve this conundrum. In a laboratory experiment in which subjects lack any private material incentive to report partners' actions, we find that most cooperators incur a cost to report a defecting partner when this has the potential to deprive the latter of future gains and to help his next partner.
reputation prisoners' dilemma experiment punishment communication costly reporting social preference inequity aversion