Intragroup punishment and intergroup conflict aversion weaken intragroup cooperation in finitely repeated games

Abstract

We experimentally analyze group-specific social preferences and dynamic strategies in finitely repeated games where helping partners hurts rivals. Cooperation with partners decreases when it inflicts losses on rivals, even when it is socially efficient. Cooperation decreases with rivalry, while it increases with synergy and previous cooperation by partners but not rivals. Our structural model of bounded rationality estimates preferences and strategies. It shows that participants anticipate future payoffs from partner cooperation and punish partner defection with unyielding defection, while further averting intergroup conflict due to altruism towards rivals. Intragroup cooperation and intergroup conflict weaken over time through these two channels.