The Role of Signals, Forgiveness, and Reputation for Cooperation

• Applicant: Professorin Dr. Astrid Dannenberg
• Subject Area: Economic Policy, Applied Economics
• Term: since 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 500845133

In this project, methods from behavioral and experimental economics are used to investigate the role of signals, forgiveness, and reputation for cooperation within groups. The focus of our analyses is the fact that people are able and sometimes willing to send deliberately false signals regarding their willingness to cooperate in order to gain advantages in social interactions. Examples can be found in many different contexts; for example, when politicians abuse their power, when athletes use drugs, or when scientists manipulate data, they signal conformity to rules to the outside world but secretly try to gain advantages over competitors. Prior literature in this area has considered the possibility that people's cooperative behavior deviates from their previously emitted signals, but these deviations were beyond their control. In these cases, the willingness to forgive mistakes plays an important role because it can prevent beneficial cooperative relationships from being destroyed by unintended accidents. However, when actors have control over whether or not their cooperative behavior matches their emitted signals, the role of forgiveness is ambiguous. Forgiveness in this case means restoring a troubled relationship, but at the same time the act of forgiveness signals to potential observers that the forgiving person can be exploited without serious consequences. Thus, the reputation of the actors becomes important. Prior literature has shown that people's behavior changes when they know that their decisions toward a person will affect their reputation, which they will use to contest future interactions with other members of society. However, this literature has focused on situations in which actors interact only once. Forgiveness of mistakes cannot be meaningfully studied in this situation, since restoring troubled relationships is not possible anyway. In this project, we want to investigate the interplay of signals, forgiveness, and reputation when actors can send but also receive false signals while relying on cooperation with others. In doing so, they must weigh whether they forgive a breach of trust in order to maintain cooperative relationships, or whether they do not forgive it in order to deter subsequent cooperators from similar ventures. We expect this research to provide new nuanced insights into the factors influencing and consequences of forgiveness, as well as valuable guidance on how to foster cooperation in societies.

• DFG Programme: Research Grants