Putting incentives in context: Trust, time horizon and the effectiveness of payoff manipulations

Abstract

This study examines how willingness to cooperate in repeated prisoner's dilemma games is shaped by the interaction between game parameters and context parameters.We hypothesize and test that the context parameters trust and time horizon jointly influence the effectiveness of manipulating the three PD-game parameters benefit, greed and fear in promoting cooperation. Specifically, we first propose that different combinations of trust and time horizon give rise to different relationships between apprehension and temptation, which characterize the relational context of an exchange relationship. We further propose that the effectiveness of reducing greed and fear in promoting cooperation is contingent upon the nature of this context. Specifically, we show that reducing greed is more effective than reducing fear in temptation-dominated contexts, while reducing fear is more effective in apprehension-dominated contexts.