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Endogenous Reputation Formation: Cooperation and Identity under the Shadow of the Future

Kamei, Kenju (2015): Endogenous Reputation Formation: Cooperation and Identity under the Shadow of the Future.

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Abstract

People are interacting more with strangers thanks to recent technological advancements in online platforms. Recent studies have shown that institutions that make people’s decisions known to others may enhance cooperation in such infinitely-repeated situations. But it is still unknown whether people can successfully cooperate with each other by choosing to show their identities and building good reputations when there is an option to hide them. We deal with this question using an experimental laboratory. Our experiment shows that a non-negligible fraction of people conceal their identities and people fail to cooperate with each other if hiding identities is free. However, almost all show their identities and successfully achieve cooperation with their partners if a small explicit cost is charged for act of hiding.

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