The Research Seminar on Environment, Resource and Climate Economics (RSERC) is jointly organized by DIW Berlin, TU Berlin, PIK and MCC Berlin. It brings together environmental and resource economists from the Berlin and Potsdam universities and research institutions that discuss latest research by distinguished external scholars or by members of the group.
Abstract:
Protection against stochastic losses is an important challenge which relies to a large extent on the voluntary cooperation of individuals in modern societies. Prevention may be realized by actions which reduce the size of potential damages or the probability of their occurrence. In this paper, we investigate the difference in the evolution of cooperation on both types of actions. Specifically, we analyze behavior theoretically and experimentally in a repeated four-person prisoner's dilemma game with probabilistic damages. Our results show that cooperation levels on probability reduction are significantly higher than on damage reduction. In the first case, cooperation is sustained, while cooperation declines over time in the second case. Our results indicate that cooperators in both settings consider the absence of the damage as the real success leading to a reinforcement of cooperation, while non-cooperating learn to cooperate following the experience of damages.