Cooperation in partnerships: the role of breakups and reputation

Abstract

We investigate experimentally if endogenous partnership formation improves efficiency in social dilemmas. Subjects play multiple two-player public-goods games, where they can break up with their partner periodically. A stable-marriage mechanism based on rankings provided by singles determines the new matches. We vary the information subjects have on possible matches and whether staying in a partnership leads to a cost or a bonus. We find that endogenous group formation can increase efficiency. Both the provision of contribution history and bonuses have positive effects. At least one of these factors is required for efficiency improvements. The presence of both leads to the best results. (JEL: D03, D83, H41)