Cooperation, Discounting, and the Effects of Delayed Costs and Benefits

Abstract

Numerous studies have investigated how people resolve intertemporal trade-offs in individual decision making, but little is known about how the timing of costs and benefits affects behavior in strategic decision situations. Here, we experimentally study how delayed costs and/or benefits affect cooperation in a social dilemma situation. We find that cooperation is substantially reduced (increased) when only the benefits (costs) of cooperation are shifted towards the future. We show that the change in contributions can be explained by (i) a shift in the beliefs about others' cooperativeness, (ii) a shift in subjects' willingness to conditionally cooperate, and (iii) a subject's degree of impatience. We further demonstrate that the amount of economic incentives needed to close the cooperation gap are substantial, indicating discount rates in our strategic context of about 50 percent, much higher than the ones typically observed in individual decision contexts. Finally, when both costs and benefits are delayed to the same extent, contribution levels do not change, indicating that cooperation is time-consistent.

The influence of empirical and normative expectations on cooperation

“…Beliefs were incentivized using the most likely interval elicitation rule (MLI) method as proposed bySchlag and van der Weele (2015).6 After the second part, there was one additional task in which participants faced a price list to elicit their time preferences. This data was used for another paper (seeKölle and Lauer (2019) for further details).…”

Caring for the future can turn tragedy into comedy for long-term collective action under risk of collapse

“…Our results highlight the importance of individual time preferences for successful cooperation under risk of collapse. Since behavioral experiments have shown that people do discount (37)(38)(39), this calls for experimental designs to investigate how human time preferences influence the challenge to avoid collapse collectively. It is important to test, for example, whether one can distinguish with human players between a coordination challenge and a comedy and if so, do they experience a black hole; whether the critical collapse impact at the game regime borders indeed scales with N at large N , and whether these critical N /m are independent of the public good enhancement factor f .…”

“…benefits and costs (37,38). This holds true when, additionally, catastrophic tipping is considered (39).…”

“…This holds true when, additionally, catastrophic tipping is considered (39). However, when costs and benefits are assumed to occur at the same time, time preferences seem to have little effect on cooperation (38,40,41). Under completely myopic conditions (i.e., the game ends after one round of play), it has been found that voting can restore cooperation with future generations (42).…”

Can you change my generosity towards future others? The impact of observability on intertemporal pro‐social decisions

“…Several studies hypothesized that generosity decreases in a nonconstant hyperbolic fashion across time delays (e.g., Kovarik, 2009;Lu et al, 2023Lu et al, , 2022Ogawa & Ida, 2015). By contrast, some studies do the exact opposite (e.g., Andreoni & Serra-Garcia, 2021;Breman, 2011), yet others find no effect (Kölle & Lauer, 2019). Furthermore, even the theoretical explanations proposed to explain these results seem inconsistent.…”