Economic Ties and Social Dilemmas : An Experimental Study

Agents who are tied in a social dilemma situation, often times also engage in other economic activities that require (bilateral) cooperation. We develop an economic experiment to test whether the threat of being excluded from the benefits of cooperation in such an alternative economic activity can be an effective mechanism to deter free-riding in the social dilemma situation. Modelling the former as a gift-giving game and the latter as a common pool game, we find that indeed resource extraction is closer to the socially optimal level if subjects interact with the same individuals in both activities, than if they do not. In addition, we find that sanctioning by means of exclusion is more effective the more profitable the alternative activity