Do economic inequalities affect long-run cooperation and prosperity?

  • Gabriele CameraEmail author
  • Cary Deck
  • David Porter
Original Paper


We explore if fairness and inequality motivations affect cooperation in indefinitely repeated games. Each round, we randomly divided experimental participants into donor–recipient pairs. Donors could make a gift to recipients, and ex-ante earnings are highest when all donors give. Roles were randomly reassigned every period, which induced inequality in ex-post earnings. Theoretically, income-maximizing players do not have to condition on this inequality because it is payoff-irrelevant. Empirically, payoff-irrelevant inequality affected participants’ ability to coordinate on efficient play: donors conditioned gifts on their own past roles and, with inequalities made visible, discriminated against those who were better off.


Cooperation Experiments Indefinitely repeated games Social dilemmas 

JEL Classification

C70 C90 D03 E02 



We thank Co-Editor M. C. Villeval and two anonymous referees for helpful suggestions that improved this study from an earlier version. We also thank N. Wilcox for helpful conversations, K. Bregu for help running the experiments and seminar participants at Chapman University, the Federal Reserve Bank of Cleveland, Humboldt University, the University of Basel, and the Theory and Experiments in Monetary Economics Conference at GMU. G. Camera acknowledges partial research support through the NSF Grant CCF-1101627.

Supplementary material

10683_2019_9610_MOESM1_ESM.pdf (564 kb)
Supplementary material 1 (pdf 563 KB)


  1. Abreu, D., Pierce, D., & Stacchetti, E. (1990). Toward a theory of discounted repeated games with imperfect monitoring. Econometrica, 58, 1041–1063.CrossRefGoogle Scholar
  2. Aghion, P., & Williamson, J. (1998). Growth, inequality, and globalization. New York: Cambridge University Press.Google Scholar
  3. Anderson, L. R., Mellor, J. M., & Milyo, J. (2006). Induced heterogeneity in trust experiments. Experimental Economics, 9, 223–235.CrossRefGoogle Scholar
  4. Andreoni, J., & Varian, H. (1999). Preplay contracting in the Prisoners’ Dilemma. Proceedings of the National Academy of Sciences of the United States of America, 96(19), 10933–10938.CrossRefGoogle Scholar
  5. Bigoni, M., Camera, G., & Casari, M. (2018). Partners or strangers? Cooperation, monetary trade, and the choice of scale of interaction. American Economic Journal: Microeconomics, 3, 164.Google Scholar
  6. Blanco, M., Engelmann, D., & Normann, H. T. (2011). A within-subject analysis of other-regarding preferences. Games and Economic Behavior, 72(2), 321–338.CrossRefGoogle Scholar
  7. Bolton, G. E., & Ockenfels, A. (2000). ERC: A theory of equity, reciprocity and competition. American Economic Review, 90, 166–193.CrossRefGoogle Scholar
  8. Camera, G., & Casari, M. (2009). Cooperation among strangers under the shadow of the future. The American Economic Review, 99(3), 979–1005.CrossRefGoogle Scholar
  9. Camera, G., & Casari, M. (2014). The coordination value of monetary exchange: Experimental evidence. American Economic Journal: Microeconomics, 6(1), 290–314.Google Scholar
  10. Camera, G., Casari, M., & Bigoni, M. (2013). Money and trust among strangers. Proceedings of the National Academy of Sciences of the United States of America, 110(37), 14889–14893.CrossRefGoogle Scholar
  11. Dal Bó, P. (2005). Cooperation under the shadow of the future: Experimental evidence from infinitely repeated games. American Economic Review, 95(5), 1591–1604.CrossRefGoogle Scholar
  12. Dal Bó, P., & Fréchette, G. (2018). On the determinants of cooperation in infinitely repeated games: A survey. Journal of Economic Literature, 56(1), 60–114.CrossRefGoogle Scholar
  13. Deck, C. (2001). A test of game theoretic and behavioral models of play in exchange and insurance environments. American Economic Review, 91(5), 1546–1555.CrossRefGoogle Scholar
  14. Ellison, G. (1994). Cooperation in the prisoner’s dilemma with anonymous random matching. Review of Economic Studies, 61, 567–588.CrossRefGoogle Scholar
  15. Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114(3), 817–868.CrossRefGoogle Scholar
  16. Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178.CrossRefGoogle Scholar
  17. Gangadharan, L., Nikiforakis, N., & Villeval, M. C. (2015). Equality concerns and the limits of self-governance in heterogeneous populations. IZA Discussion Papers, No. 9384.Google Scholar
  18. Goeree, J. K., & Holt, C. A. (2000). Asymmetric inequality aversion and noisy behavior in alternating-offer bargaining games. European Economic Review, 44(4), 1079–1089.CrossRefGoogle Scholar
  19. Greiner, B., Ockenfels, A., & Werner, P. (2012). The dynamic interplay of inequality and trust—An experimental study. Journal of Economic Behavior and Organization, 81, 355–365.CrossRefGoogle Scholar
  20. Güth, W., Kliemt, H., & Ockenfels, A. (2003). Fairness versus efficiency: An experimental study of (mutual) gift giving. Journal of Economic Behavior and Organization, 50(4), 465–475.CrossRefGoogle Scholar
  21. Harrison, G. W., Laub, M. I., & Rutström, E. E. (2009). Risk attitudes, randomization to treatment, and self-selection into experiments. Journal of Economic Behavior and Organization, 70(3), 498–507.CrossRefGoogle Scholar
  22. Harsanyi, John C., & Reinhard, Selten. (1988). A general theory of equilibrium selection in games. Cambridge: MIT Press.Google Scholar
  23. Haushofer, Johannes, & Fehr, Ernst. (2014). On the psychology of poverty. Science, 344(6186), 862–867.CrossRefGoogle Scholar
  24. Holt, C. A., & Laury, S. K. (2002). Risk aversion and incentive effects. American Economic Review, 92(5), 1644–1655.CrossRefGoogle Scholar
  25. Kagel, J. H., & Willey-Wolfe, K. (2001). Tests of fairness models based on equity considerations in a three-person ultimatum game. Experimental Economics, 4(3), 203–219.CrossRefGoogle Scholar
  26. Kandori, M. (1992). Social norms and community enforcement. Review of Economic Studies, 59, 63–80.CrossRefGoogle Scholar
  27. Konow, J. (2000). Fair shares: Accountability and cognitive dissonance in allocation decisions. American Economic Review, 90, 1072–1091.CrossRefGoogle Scholar
  28. Loch, C. H., & Wu, Y. (2008). Social preferences and supply chain performance: An experimental study. Management Science, 54(11), 1835–1849.CrossRefGoogle Scholar
  29. Mollerstrom, J., Reme, B., & Sørensen, Erik. (2015). Luck, choice and responsibility—An experimental study of fairness views. Journal of Public Economics, 131, 33–40.CrossRefGoogle Scholar
  30. Nishi, A., Shirado, H., Rand, D. G., & Christakis, N. A. (2015). Inequality and visibility of wealth in experimental social networks. Nature, 526, 426.CrossRefGoogle Scholar
  31. O’Reilly, Charles A. (1980). Individuals and information overload in organizations: Is more necessarily better? The Academy of Management Journal, 23(4), 684–696.CrossRefGoogle Scholar
  32. Palfrey, T. R., & Rosenthal, H. (1994). Repeated play, cooperation and coordination: An experimental study. The Review of Economic Studies, 61(3), 545–565.CrossRefGoogle Scholar
  33. Piketty, T. (2014). Capital in the twenty-first century. Cambridge: Harvard University Press.CrossRefGoogle Scholar
  34. Putnam, R. (2000). Bowling alone: The collapse and revival of American community. New York: Simon and Schuster.Google Scholar
  35. Rabin, M. (1993). Incorporating fairness into game theory and economics. American Economic Review, 83, 1281–1302.Google Scholar
  36. Roth, A. E., & Murnighan, K. (1978). Equilibrium behavior and repeated play of the prisoner’s dilemma. Journal of Mathematical Psychology, 17, 189–198.CrossRefGoogle Scholar
  37. Sadrieh, A., & Verbon, H. A. (2006). Inequality, cooperation, and growth: An experimental study. European Economic Review, 50, 1197–1222.CrossRefGoogle Scholar
  38. Sherstyuk, K., Tarui, N., & Saijo, T. (2013). Payment schemes in infinite-horizon experimental games. Experimental Economics, 16(1), 125–153.CrossRefGoogle Scholar
  39. Smith, V. (1994). Economics in the laboratory. Journal of Economic Perspectives, 8(1), 113–131.CrossRefGoogle Scholar
  40. Sonnemans, J., Schram, A., & Offerman, T. (1999). Strategic behavior in public good games: When partners drift apart. Economics Letters, 62, 35–41.CrossRefGoogle Scholar
  41. Stiglitz, J. E. (2012). The price of inequality: How today’s divided society endangers our future. New York: W. W. Norton & Company.Google Scholar
  42. Tavoni, A., Dannenberg, A., Kallis, G., & Löschel, A. (2011). Inequality, communication, and the avoidance of disastrous climate change in a public goods game. Proceedings of the National Academy of Sciences of the United States of America, 108(29), 11825–11829.CrossRefGoogle Scholar
  43. Troutman, C. M., & Shanteau, J. (1977). Inferences based on nondiagnostic information. Organizational Behavior and Human Performance, 19, 43–55.CrossRefGoogle Scholar

Copyright information

© Economic Science Association 2019

Authors and Affiliations

  1. 1.Economic Science InstituteChapman UniversityOrangeUSA
  2. 2.University of BolognaBolognaItaly
  3. 3.University of AlabamaTuscaloosaUSA

Personalised recommendations