Social surplus and beliefs determine cooperation rates in the one-shot Prisoner’s Dilemma

Abstract: We provide perhaps the first clean evidence on how cooperation rates vary across payoff parameters in the Prisoner’s Dilemma (PD), using four one-shot games that differ only in the payoffs from mutual cooperation. Our results show that higher social surplus from cooperation is associated with substantially higher cooperation rates, which increase monotonically from 23 % to 60%. Population beliefs about cooperation rates track closely actual cooperation rates; higher cooperation is expected from others when mutual cooperation payoffs are higher. A simple regression model estimates the effect that monetary payoffs and beliefs have on cooperation rates. When using beliefs to compute the expected gain of actions, we show that the cooperation rate increases as the monetary gain from defection increases, because players cooperate more when they expect others to do the same. In conclusion, the one shot PD paradox is not just the existence of significant rates of cooperation in the one shot PD, but increasing rates of cooperation as the expected gain from defection increases, when players should be perfectly aware that they increase