Munich Personal RePEc Archive

Cooperation in an Uncertain and Dynamic World

Gallo, Edoardo and Riyanto, Yohanes E. and Roy, Nilanjan and Teh, Tat-How (2019): Cooperation in an Uncertain and Dynamic World.

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Abstract

We investigate how reputational uncertainty and the rate of change of the social environment interact to influence cooperation in social networks. Reputational uncertainty significantly decreases cooperation and welfare, induces more forgiveness toward defectors, and promotes opportunistic play. Compared to reputational uncertainty, a fast-changing social environment only causes a second-order qualitative increase in cooperation by making individuals more lenient in imposing a network-punishment (link removal). The interaction between reputational uncertainty and a fast-changing social environment induces more lenient strategies by reducing the frequency of action-punishment (retaliatory defection). Although neither of them affects the aggregate network metrics, their interaction decreases homophily among cooperators.

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