Economics Seminar（2014-25）

Topic:Does Gradualism Build Cooperation?Evidence from A Multi-round Investment

Experiment

Speaker:Maoliang Ye

Affiliation: Renmin University of China

Time:Tuesday, 18 November. 14:00-15:30pm

Location: Room 217, Guanghua Building 2

Abstract：

This paper examines the effect of gradualism -- increasing the stake of investment slowly over time rather than requiring a high stake of investment immediately -- in cooperation building using a multi-round binary-choice trust (investment) experiment. We randomly assign subjects to three treatments:starting and continuing at a high stake (the “Big Bang” treatment), starting at a low stake but jumping to a high stake after a few rounds (the “Semi-gradualism” treatment), and starting at a low stake and gradually increasing the stake over time (the “Gradualism” treatment). We find that at the beginning the investment rate of trustors is the same for all treatments, but the fair return rate from the trustees is lower for the “Big Bang” treatment; as a result, the “Big Bang” treatment has a lower level of subsequent investment rate and a lower rate of successful cooperation. However, investment rate and fair return rate for all treatments sharply decrease in the end (“end-of-game” effect). Our main results are supported by a behavioral repeated-game model which allows the coexistence of rational and reciprocal types of trustees.

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