Endogenous monitoring through voluntary reporting in an infinitely repeated prisoner's dilemma game: experimental evidence

Abstract

Exogenous reputational information is known to improve cooperation. This study experimentally investigates how people create such information by reporting their partner's action choices, and whether endogenous monitoring helps to sustain cooperation, in an indefinitely repeated prisoner's dilemma game with random matching. The experimental results show that most subjects report their opponents' action choices, thereby successfully cooperating when reporting does not involve costs. However, when reporting is costly, participants are strongly discouraged from doing so. Consequently, they fail to achieve strong cooperative norms when the reported information is conveyed privately only to their next‐round interaction partners. Costly reporting occurs only occasionally even when there is a public record whereby all future partners can check the reported information, but significantly more frequently relative to the condition in which it is sent to the next partner only. With public records, groups can foster cooperative norms aided by reported information that gradually accumulates and becomes more informative over time.