The Enemy of My Enemy: How Competition Mitigates Social Dilemmas

This paper studies how competition between groups affects cooperation. In the control condition, pairs of subjects play an indefinitely repeated Prisoner’s Dilemma game without external competition. In the treatment, two pairs compete against each other. No monetary rewards are tied to winning, isolating the bare impact of competition. In the treatment, cooperation increases by 16 percentage points. Strategies estimation shows a shift from selfish strategies (Always Defect) to cooperative ones (Grim Trigger). A theoretical model provides a rationale for the experimental results.