Ellingsen, Tore Herrmann, Benedikt Nowak, Martin A. Rand, David G. Tarnita, Corina E.
Year of Publication:
CESifo Working Paper: Behavioural Economics 4042
We experimentally investigate the nature of cooperation in various repeated games, with subjects from Romania and USA. We find stark cross-country differences in the propensity to sustain multilateral cooperation through bilateral rewards and punishments. U.S. groups perform well because sufficiently many cooperators are willing to discipline free riders. Romanian cooperators are less prone to jeopardize their productive bilateral relationships for the benefit of the group, collectively failing to provide adequate discipline. Our analysis indicates that the performance differences constitute a group-level phenomenon, being largely due differences in shared beliefs rather than differences in individuals' preferences.