Cooperating Over Losses and Competing Over Gains: a Social Dilemma Experiment

Ispano, Alessandro and Schwardmann, Peter (2017): Cooperating Over Losses and Competing Over Gains: a Social Dilemma Experiment. Collaborative Research Center Transregio 190, Discussion Paper No. 23

Abstract

Evidence from studies in international relations, the politics of reform, collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains. To test whether the prospect of losses can induce cooperation, we let experimental subjects play the travelers dilemma in the gain and loss domain. Subjects cooperate substantially more over losses. Furthermore, our results suggest that this treatment effect is best explained by reference-dependent risk preferences and reference-dependent strategic sophistication. We discuss the implications of our results and relate our findings to other experimental games played in the loss domain.

• Item Type: Paper
• Keywords: Travelers dilemma; loss domain; diminishing sensitivity; strategic sophistication
• Faculties: Economics > Collaborative Research Center Transregio "Rationality and Competition"
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C90, D01, D03, D81
• Language: English