Uncertainty and Precommitment in Social Dilemmas
"Once? No. Twenty times? Sure!"
Uncertainty and precommitment
in social dilemmas
Association for Consumer Research
Dallas, TX
Oct, 2018
David J. Hardisty, Howard Kunreuther, David
Krantz, Poonam Arora, Amir Sepehri
UBC Sauder, UPenn, Columbia U, Manhattan College,
Western Ivey
Funding support from NSF and SSHRC
Submitting Author:
Amir Sepehri
IDS Background
•
Interdependent Security (IDS) is a social
dilemma with
stochastic losses
(
Kunreuther &
Heal, 2003)
–
border security
–
pest/disease control
–
risky investments
•
People cooperate less in IDS than in a
typical Prisoner’s Dilemma
Research Motivation
•
In real life, people sometimes precommit
to invest in protection for several years in
advance at a time
•
examples:
–
long-term insurance contracts
–
CO
2
reductions
–
safety decisions (seat-belt, helmet, etc)
Research Motivation
•
Normally, greater delay is associated with
increased uncertainty
•
example: $10 promised today or in 20
years
•
However, with repeated low probability
events, increasing time horizon may
increase
subjective probability
•
Examples (choice bracketing):
–
Chance of a fire today or over 20 years?
–
Wear your seatbelt just once or every time?
Study 1
Question 1: How does precommitment affect
investment rates?
IDS instructions (pg 1)
Scenario: Imagine you are an investor in Indonesia
and you have a risky joint venture that earns
8,500 Rp per year. However, there is a small
chance that you and/or your counterpart will
suffer a loss of 40,000 Rp in a given year. You
have the option to pay 1,400 Rp for a safety
measure each year to protect against the
possible loss. However, you will only be fully
protected if both you and your counterpart invest
in protection. The loss has an equal chance of
happening each year, regardless of whether it
occurred in the previous year.
IDS payoff matrix
PD payoff matrix
IDS: Choices
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INVEST | NOT INVEST
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DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
Precommitted Condition
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INVEST | NOT INVEST
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DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
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INVEST | NOT INVEST
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DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[...]
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INVEST | NOT INVEST
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DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
Feedback
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N
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8
8
This Means
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Design Details
•
participants played blocks of 20 rounds
(“years”) with an anonymous partner
•
4 blocks total
•
random pairing before each block
•
1 block paid out for real money
•
all manipulations between subject, 30
subjects per group
PD vs IDS
0
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0.9
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IDS rep
PD rep
PD vs IDS
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IDS rep
PD rep
PD vs IDS
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IDS rep
PD rep
Conclusion 1
•
Uncertainty lowers cooperation between
individuals playing loss framed dilemma
•
Why?
- Perhaps uncertainty transforms the game
from a social dilemma to a game of
chance
IDS: repeated vs precommitted
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IDS rep
IDS pre
PD rep
IDS: repeated vs precommitted
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IDS rep
IDS pre
PD rep
Conclusion 2
•
Under uncertainty, precommitment raises
cooperation
•
Why? Perhaps precommitment raises
subjective probability of the loss
Coded Free Responses
Predictions of counterpart
Interesting results, but a major
complicator:
Partner interaction
(or non-interaction) effects
Study 2
Question: Do individuals playing a
(non-dilemma)
solo
game invest
more often when precommitting?
Solo payoff matrix
IDS repeated vs Solo repeated
IDS repeated vs Solo repeated
Conclusion 3
•
IDS players are mostly playing a game of
chance, showing risk-seeking for losses
Solo: repeated vs precommited
Solo: repeated vs precommited
0
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Block 1
Block 2
Block 3
Block 4
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IDS rep
IDS pre
Solo rep
Solo pre
Conclusion 4
•
Precommitment raises investment rates by
individuals
•
Why? Perhaps subjective probability is
increased
How else can we improve
investment under uncertainty?
•
Environmental framing?
–
Highlight social goals and raise investment
rates?
Study 3
Question: Will environmental
framing will increase
investment rates?
IDS environmental instructions
Scenario:
Imagine you are a farmer in Indonesia. You get
an annual yield of 8,500 Rupiah (Rp) from your potato
crops.
Both you and a neighboring farmer use the
pesticide Aldicarb on your potato crops. However, there
is a small risk of groundwater contamination each year
from this pesticide, which is toxic.
If contamination
occurs, you and/or your neighboring farmer will suffer a
loss of 40,000 Rp, to pay for groundwater cleanup.
You
have the option to switch to a more expensive, though
safer, pesticide
, at the cost of 1,400 Rp annually, to
avoid groundwater contamination. However, you will only
be fully protected if both you and your counterpart invest
in the safer pesticide. The groundwater contamination
has an equal chance of happening each year, regardless
of whether it occurred in the previous year.
IDS environmental payoff matrix
IDS Environmental: Choices
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INVEST | NOT INVEST
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DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
Feedback
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1
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N
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m
b
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:
8
8
This Means
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:
Y
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1
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4
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Environmental Frame Results
Environmental Frame Results
Environmental Frame Results
Conclusion 5
•
Environmental framing may not have a
significant effect on investment rates
Study 4
Question: How does precommitment
affect investment rates in a
deterministic
prisoners dilemma
IDD payoff matrix
PD: Repeated vs Precommitted
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Block 1
Block 2
Block 3
Block 4
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PD rep
PD pre
PD: Repeated vs Precommitted
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Block 1
Block 2
Block 3
Block 4
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PD rep
PD pre
Conclusion 6
•
Precommitment
reduces
investment rates
in deterministic social dilemmas
•
Why? Perhaps individuals realize there is
no opportunity for reciprocity and are
worried about being a sucker
Summary: a pretty 2x2
Study 5
•
Solo game, N=355
•
Repeated vs Precommitted
•
Loss vs Gain
Study 5: Results
Summary
•
Precommitment lowers cooperation in
regular prisoner’s dilemma, but raises it in
interdependent security situations
•
Why?
In IDS, precommitment raises subjective
probability of loss, but in the deterministic
case it removes the possibility of
reciprocity
Thank You!
What did people say?
IDS - Repeated
•
The probability of loosing was too low so I didn't decide to invest.
•
For the most part, it seemed better NOT to invest than to invest. I
found that the initial 1-5 years influenced how I invested in the
remaining 15 years. So if I mainly did NOT invest the first 5 years,
then I didn't invest for the remaining 15 years. I also found that my
partner followed how I invested if I had no losses.
•
I chose not to invest dut to low probality of loss
•
It was a little intimidating, but after awhile an understanding occurred
between myself and my partner and we flowed fairly well over the
years.
•
I chose to invest in the beginning so I wouldn't end up with negative
numbers. Afterwards, I chose not to invest because I figured the
chances of losing 40,000 were small, and even if I lost the money
once, I would probably not lose it again in the 20 year span.
IDS - Precommitted
•
I chose to invest almost all 20 times except for one or 2 years to
make an extra bonus
•
An interesting game where I can observe that some people do take
risks. I chose to invest in every year and every scenario since
statistically it makes more sense to invest in protection. The loss is
big compared to the amount spent on protection and there is an
average of more than one occurrence of loss in a 20 year period
even if only one person invests.
•
I invested too many times the first round, and when I saw that my
partner rarely invested and suffered little losses, I invested less as
well by the next round. I felt rather smug when he/she lost 40k while
I invested-- but I thought it was interesting that I invested a lot more
often than most of my counterparts.
•
Initially I was just playing it safe, and then for the 2 later rounds I
pretty much went with the Nash Equilibrium choice of Not Investing.
Solo - Repeated
•
At first, it seemed as though investing would be a good
idea. After the second round, I realized that not investing
would probably give a better payout because the
chances of actually suffering a loss was so slim.
•
I mainly choose to not invest because there was only a
4% chance of losing 40000 Rp. But then every 4 or 5
turns, I would randomly decide to invest in protection.
Now that I think about it, even if I hadn't gone with
investing at all, the outcome may have been the same or
maybe even better.
•
I would invest at points where I thought that I was happy
enough with my cumulative gains that I didn't want to risk
losing what I had already gained.
Solo - Precommitted
•
It's obvious safer to invest, and the investment totally
worth that. Even if you invest for 20 years, the cost is
lower than one large loss which might happen every
year. However, as there was no large loss happened in
the first session, I therefore chose to take some risks in
following sessions.
•
The potential loss from investing every time seemed less
than from not investing more often where even one bad
year could produce less income.
•
40000 Rp possible loss * 4% chance = 1600 Rp loss
expected. So in general it's worth it to invest. However,
given the low likelihood, it might be worth it to take a risk
& skip some years.
This research explores the impact of uncertainty and precommitment on social dilemmas, specifically focusing on the Interdependent Security (IDS) scenario. It investigates how precommitment influences investment rates and decision-making in situations involving stochastic losses and risky investments. The study delves into real-life examples of precommitment strategies in long-term insurance, CO2 reductions, and safety decisions. By analyzing choice bracketing and subjective probabilities over time horizons, the research sheds light on how individuals navigate uncertainty and make strategic decisions in social dilemmas.
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"Once? No. Twenty times? Sure!" Uncertainty and precommitment in social dilemmas David J. Hardisty, Howard Kunreuther, David Krantz, Poonam Arora, Amir Sepehri UBC Sauder, UPenn, Columbia U, Manhattan College, Western Ivey Funding support from NSF and SSHRC Association for Consumer Research Dallas, TX Oct, 2018
Submitting Author: Amir Sepehri
IDS Background Interdependent Security (IDS) is a social dilemma with stochastic losses (Kunreuther & Heal, 2003) border security pest/disease control risky investments People cooperate less in IDS than in a typical Prisoner s Dilemma
Research Motivation In real life, people sometimes precommit to invest in protection for several years in advance at a time examples: long-term insurance contracts CO2 reductions safety decisions (seat-belt, helmet, etc)
Research Motivation Normally, greater delay is associated with increased uncertainty example: $10 promised today or in 20 years However, with repeated low probability events, increasing time horizon may increase subjective probability Examples (choice bracketing): Chance of a fire today or over 20 years? Wear your seatbelt just once or every time?
Study 1 Question 1: How does precommitment affect investment rates?
IDS instructions (pg 1) Scenario: Imagine you are an investor in Indonesia and you have a risky joint venture that earns 8,500 Rp per year. However, there is a small chance that you and/or your counterpart will suffer a loss of 40,000 Rp in a given year. You have the option to pay 1,400 Rp for a safety measure each year to protect against the possible loss. However, you will only be fully protected if both you and your counterpart invest in protection. The loss has an equal chance of happening each year, regardless of whether it occurred in the previous year.
IDS payoff matrix Your Counterpart NOT INVEST - You definitely lose 1,400 Rp and have a 1% chance of losing an additional 40,000 Rp. INVEST - You definitely lose 1,400 Rp, and have a 0% chance of the large loss occurring. You INVEST - Your counterpart definitely loses 1,400 Rp, and has a 0% chance of the large loss occurring. - You have a 3% chance of losing 40,000 Rp and a 97% chance of losing 0 Rp. - Your counterpart has a 3% chance of losing 40,000 Rp and a 97% chance of losing 0 Rp. NOT INVEST - You have a 4% chance of losing 40,000 Rp and a 96% chance of losing 0 Rp. - Your counterpart definitely loses 1,400 Rp and has a 1% chance of losing an additional 40,000 Rp. - Your counterpart has a 4% chance of losing 40,000 Rp and a 96% chance of losing 0 Rp.
PD payoff matrix Your Counterpart NOT INVEST - You lose 1,800 Rp. - Your counterpart loses 1,200 Rp. INVEST - You lose 1,400 Rp. - Your counterpart loses 1,400 Rp. You INVEST NOT INVEST - You lose 1,200 Rp. - Your counterpart loses 1,800 Rp. - You lose 1,600 Rp. - Your counterpart loses 1,600 Rp.
IDS: Choices Will you invest in protection this year? INVEST | NOT INVEST Do you think your counterpart will invest in protection this year? DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
Precommitted Condition Will you invest in protection in year 1? INVEST | NOT INVEST Do you think your counterpart will invest in protection in year 1? DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Will you invest in protection in year 2? INVEST | NOT INVEST Do you think your counterpart will invest in protection in year 2? DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ [...] Will you invest in protection in year 20? INVEST | NOT INVEST Do you think your counterpart will invest in protection in year 20? DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
Feedback Year 1 Results Your choice: INVEST Your counterpart's choice: NOT INVEST The random number was: 88 This Means For you, the large loss: did not occur For your counterpart, the large loss: did not occur Result: You lost 1,400 Rp, and your counterpart lost 0 Rp
Design Details participants played blocks of 20 rounds ( years ) with an anonymous partner 4 blocks total random pairing before each block 1 block paid out for real money all manipulations between subject, 30 subjects per group
PD vs IDS 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep 0.5 PD rep 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
PD vs IDS 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep 0.5 PD rep 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
PD vs IDS 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep 0.5 PD rep 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Conclusion 1 Uncertainty lowers cooperation between individuals playing loss framed dilemma Why? - Perhaps uncertainty transforms the game from a social dilemma to a game of chance
IDS: repeated vs precommitted 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep IDS pre PD rep 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
IDS: repeated vs precommitted 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep IDS pre PD rep 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Conclusion 2 Under uncertainty, precommitment raises cooperation Why? Perhaps precommitment raises subjective probability of the loss
Coded Free Responses 1.00 .90 Proportion of Participants Mentioning .80 .70 .60 Counterpart Probability .50 .40 .30 .20 .10 .00 SPD-rep E SPD-pre E DPD-rep E
Predictions of counterpart 1 0.9 Mean Investment Proportion 0.8 0.7 0.6 DPD-rep E SPD-pre E SPD-rep E 0.5 0.4 0.3 0.2 0.1 0 Definitely Not Probably Not Probably Definintely Prediction of Counterpart's Investment
Interesting results, but a major complicator: Partner interaction (or non-interaction) effects
Study 2 Question: Do individuals playing a (non-dilemma) solo game invest more often when precommitting?
Solo payoff matrix INVEST - You definitely lose 1,400 Rp, and have a 0% chance of the large loss occurring. NOT INVEST - You have a 4% chance of losing 40,000 Rp and a 96% chance of losing 0 Rp.
IDS repeated vs Solo repeated 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep IDS pre Solo rep Solo pre 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
IDS repeated vs Solo repeated 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep IDS pre Solo rep Solo pre 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Conclusion 3 IDS players are mostly playing a game of chance, showing risk-seeking for losses
Solo: repeated vs precommited 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep IDS pre Solo rep Solo pre 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Solo: repeated vs precommited 1 0.9 0.8 Investment Proportion 0.7 0.6 IDS rep IDS pre Solo rep Solo pre 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Conclusion 4 Precommitment raises investment rates by individuals Why? Perhaps subjective probability is increased
How else can we improve investment under uncertainty? Environmental framing? Highlight social goals and raise investment rates?
Study 3 Question: Will environmental framing will increase investment rates?
IDS environmental instructions Scenario: Imagine you are a farmer in Indonesia. You get an annual yield of 8,500 Rupiah (Rp) from your potato crops. Both you and a neighboring farmer use the pesticide Aldicarb on your potato crops. However, there is a small risk of groundwater contamination each year from this pesticide, which is toxic. If contamination occurs, you and/or your neighboring farmer will suffer a loss of 40,000 Rp, to pay for groundwater cleanup. You have the option to switch to a more expensive, though safer, pesticide, at the cost of 1,400 Rp annually, to avoid groundwater contamination. However, you will only be fully protected if both you and your counterpart invest in the safer pesticide. The groundwater contamination has an equal chance of happening each year, regardless of whether it occurred in the previous year.
IDS environmental payoff matrix Your Counterpart INVEST NOT INVEST You INVEST - You definitely lose 1,400 Rp, and have a 0% chance of groundwater contamination. - You definitely lose 1,400 Rp and have a 1% chance of groundwater contamination occuring and losing an additional 40,000 Rp. - Your counterpart definitely loses 1,400 Rp, and has a 0% chance of groundwater contamination. - Your counterpart has a 3% chance of losing 40,000 Rp due to groundwater contamination and a 97% chance of losing 0 Rp. - You have a 4% chance of groundwater contamination occurring and losing 40,000 Rp and a 96% chance of losing 0 Rp. NOT INVEST - You have a 3% chance of losing 40,000 Rp due to groundwater contamination and a 97% chance of losing 0 Rp. - Your counterpart definitely loses 1,400 Rp and has a 1% chance of groundwater contamination occuring and losing an additional 40,000 Rp. - Your counterpart has a 4% chance of groundwater contamination occurring and losing 40,000 Rp and a 96% chance of losing 0 Rp.
IDS Environmental: Choices Will you invest in the safer pesticide this year? INVEST | NOT INVEST Do you think your counterpart will invest in the safer pesticide this year? DEFINITELY | PROBABLY | PROBABLY NOT | DEFINITELY NOT
Feedback Year 1 Results Your choice: INVEST Your counterpart's choice: NOT INVEST The random number was: 88 This Means For you, groundwater contamination: did not occur For your counterpart, groundwater contamination : did not occur Result: You lost 1,400 Rp, and your counterpart lost 0 Rp
Environmental Frame Results 1 0.9 0.8 Investment Proportion 0.7 IDS rep IDS pre IDS rep E IDS pre E 0.6 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Environmental Frame Results 1 0.9 0.8 Investment Proportion 0.7 IDS rep IDS pre IDS rep E IDS pre E 0.6 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Environmental Frame Results 1 0.9 0.8 Investment Proportion 0.7 IDS rep IDS pre IDS rep E IDS pre E 0.6 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Conclusion 5 Environmental framing may not have a significant effect on investment rates
Study 4 Question: How does precommitment affect investment rates in a deterministic prisoners dilemma
IDD payoff matrix Your Counterpart NOT INVEST - You lose 1,800 Rp. - Your counterpart loses 1,200 Rp. INVEST - You lose 1,400 Rp. - Your counterpart loses 1,400 Rp. You INVEST NOT INVEST - You lose 1,200 Rp. - Your counterpart loses 1,800 Rp. - You lose 1,600 Rp. - Your counterpart loses 1,600 Rp.
PD: Repeated vs Precommitted 1 0.9 0.8 Investment Proportion 0.7 0.6 PD rep PD pre 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
PD: Repeated vs Precommitted 1 0.9 0.8 Investment Proportion 0.7 0.6 PD rep PD pre 0.5 0.4 0.3 0.2 0.1 0 Block 1 Block 2 Block 3 Block 4
Conclusion 6 Precommitment reduces investment rates in deterministic social dilemmas Why? Perhaps individuals realize there is no opportunity for reciprocity and are worried about being a sucker
Summary: a pretty 2x2 0.85 0.75 Mean Investment 0.65 Proportion 0.55 0.45 0.35 0.25 DPD SPD Precommitment Repeated
Study 5 Solo game, N=355 Repeated vs Precommitted Loss vs Gain
Study 5: Results 0.8 Mean investment proportion 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Loss Gain Repeated Precomitted
Summary Precommitment lowers cooperation in regular prisoner s dilemma, but raises it in interdependent security situations Why? In IDS, precommitment raises subjective probability of loss, but in the deterministic case it removes the possibility of reciprocity
