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Inefficient Cooperation under Stochastic and Strategic Uncertainty

Author

Listed:
  • Lisa Bruttel

    (University of Potsdam)

  • Werner Güth

    (LUISS Guido Carli, Max Planck Institute for Research on Collective Goods)

  • Juri Nithammer

    (University of Potsdam)

  • Andreas Orland

    (University of Potsdam)

Abstract
Stochastic uncertainty can cause difficult coordination problems that may hinder mutually beneficial cooperation. We propose a mechanism of ex-post voluntary transfers designed to circumvent these coordination problems and ask whether it can do so. To test this, we implement a controlled laboratory experiment based on a repeatedly played Ultimatum Game with a stochastic endowment. Contrary to our hypothesis, we find that allowing voluntary transfers does not entail an efficiency increase. We suggest and analyze two main reasons for this finding: First, the stochastic uncertainty forces proposers to accept high strategic uncertainty if they intend to cooperate by claiming a low amount (which many proposers do not). Second, many responders behave only incompletely conditionally cooperative by transferring too little (which hinders cooperation in future periods).

Suggested Citation

  • Lisa Bruttel & Werner Güth & Juri Nithammer & Andreas Orland, 2020. "Inefficient Cooperation under Stochastic and Strategic Uncertainty," CEPA Discussion Papers 20, Center for Economic Policy Analysis.
    • Handle: RePEc:pot:cepadp:20
    DOI: 10.25932/publishup-47550
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    Cited by:

    1. Koessler, Ann-Kathrin & Müller, Julia & Zitzelsberger, Sonja, 2023. "Asymmetric heterogeneities and the role of transfers in a public goods experiment," European Economic Review, Elsevier, vol. 159(C).

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    More about this item

    Keywords

    stochastic uncertainty; strategic uncertainty; cooperation; Ultimatum Game; experiment;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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