Cooperation When Surrounded by Exploiters: The Role of Outside Options

Cooperation is widespread, even when vulnerable to defection. The canonical explanation relies on repeated interaction between patient agents. Yet in random matching settings, where the population includes many impatient exploiters and types are unobserved, even patient agents fail to cooperate. We show that when an outside option is available, cooperation becomes possible even if the fraction of patient agents is arbitrarily small. This result extends to models of cooperation and exploitation based on morality or productivity differences. It applies across diverse contexts, including cross-country variation in cooperation and self-employment, law enforcement effectiveness, and the potential coevolution of patience and cooperation.

Link to the paper: https://drive.google.com/file/d/1TQSA7lOqPEPKnLuIKfB9BDwhJFJXht1B/view?…