Scarce and directly beneficial reputations support cooperation

A human solution to the problem of cooperation is the construction and maintenance of informal reputation hierarchies. Reputational information contributes to cooperation by providing guidelines about previous group-beneficial or free-rider behavior of opponents in social dilemma interactions. How reputation information could be credible, however, when outcomes of interactions are not publicly known, remains a puzzle. In this study, we propose that credibility could be ensured if reputation is a scarce resource and it is not believed to be earned for direct benefits. We tested these propositions in a laboratory experiment in which participants played two-person Prisoners Dilemma games without partner selection, could observe some other interactions and could communicate reputational information about possible prospective opponents to each other. We found that scarcity is a necessary condition for reputation scores to be informative. While cooperation has not been sustained at a high level in any of the conditions, reputational information clearly influenced cooperation decisions. The possibility of exchanging third-party information was able to increase the level of cooperation the most if reputation was a scarce resource and contrary to our expectations, when reputational scores have been directly translated into monetary benefits.