Abstract:
We investigate whether voluntary, decentralized upfront investments increase cooperation in settings where there is no enforcement mechanism and cooperation is not easily sustained voluntarily. We study whether this effect depends on the investments being endogenous or exogenous. Such investments are a cost that individuals have to incur before deciding whether to cooperate or not, and increase the payoff resulting from the choice to cooperate. We find that cooperation rarely emerges in treatments where investments are not possible. Introducing endogenous investment opportunities boosts overall cooperation levels. If low investments are implemented endogenously, cooperation is lower than when the same investments are exogenous. For high investments, cooperation is not significantly different between the endogenous and the exogenous conditions. This is consistent with low investments being interpreted as a signal for unwillingness to cooperate, triggering non-cooperative choices.