reputation and inequality

Reputation and Inequality

In the last several decades, ample evidence from across evolutionary biology, behavioral economics and econophysics has solidified our knowledge that reputation can promote cooperation across different contexts and environments. Higher levels of cooperation entail higher final payoffs on average, but how are these payoffs distributed among individuals? This study investigates how public and objective reputational information affects payoff inequality in repeated social dilemma interactions in large groups. I consider two aspects of inequality: excessive dispersion of final payoffs and diminished correspondence between final payoff and cooperative behavior. I use a simple heuristics-based agent model to demonstrate that reputational information does not always increase the dispersion of final payoffs in strategically updated networks, and actually decreases it in randomly rewired networks. More importantly, reputational information almost always improves the correspondence between final payoffs and cooperative behavior. I analyze empirical data from nine experiments of the repeated Trust, Helping, Prisoner’s Dilemma and Public Good games in networks of ten or more individuals to provide partial support for the predictions. Our research suggests that reputational information not only improves cooperation but may also reduce inequality.

The paper was published in Philosophical Transactions of the Royal Society B as part of the theme issue “The Language of Cooperation: Reputation and Honest Signalling.”