Decision making in the prisoner's dilemma game: The effect of exit on cooperation and social welfare

Abstract

Abstract The prisoner's dilemma game is a mixed‐motive game that offers two players the simultaneous choice between a cooperative and a defective alternative. An often neglected aspect of such a binary‐choice game, however, is that in many real‐life encounters, people can choose not only to cooperate or defect, but they also have a third option: to exit the social dilemma. Although in the literature a consensus has emerged that the addition of an exit opportunity benefits cooperation, there is only scant research into its effect on social welfare. In order to allow a direct comparison of cooperation rates and welfare levels across binary‐choice and trinary‐choice games, in this study, we used a design in which the same participants played similar games with and without an exit option (i.e., a within‐subjects design), and this in a range of structural variations. The findings of our study indicated that the aggregated outcome of both players is generally lower in games with an exit option than in games without an exit option. Moreover, our results showed that the efficiency of the exit option strongly depends on the specific outcome structure of the game (in terms of its endowment size, (a)symmetry, and level of noncorrespondence). In the discussion, it is argued that the implementation of an exit option as a strategy to increase social welfare should be critically assessed.

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