When Does Cooperation Work?

When Does Cooperation Work?

What makes cooperation possible – why don’t people take advantage of the other side at the first chance they get? The answer to that was found by people we usually deride, namely, the traditional economists who study “rational economic man.”

robert aumannRobert Aumann was co-awarded the 2005 Nobel Prize in economics for his work on cooperation. What he found was a simple principle: “repetition enables cooperation.” He explained, “People are much co-operative in a long-term relationship. They know that there is a tomorrow, that inappropriate behavior will be punished in the future.” His Nobel Prize speech, is pretty dense but readable if you stop to think things through. No special mathematics are needed.

Punishment is the key to why repetition produces cooperation, Aumann argued:

“If you are stopped by a policeman for speeding, you do not offer him a bribe, because you are afraid that he will turn you in for offering a bribe. But why should he not accept the bribe? Because he is afraid that you will turn him in for accepting it. But why would you turn him in? Because if you don’t he might turn you in for not turning him in. And so on.”

One way to ensure punishment is to have a strong government which enforces agreement, such that the parties know that failure to abide by the agreement will carry a heavy penalty. That is not the only way; the punishment could also be inflicted by the aggrieved party – though that is messier. Messier, but necessary in some cases. Applied to international politics, Aumann explains, “nations must continue to learn war in order not to fight” – sometimes only the readiness to go to war can guarantee the peace.

Aumann also showed that cooperative solutions only work if the parties are patient:

“For repetition to engender cooperation, the players must not be too eager for immediate results. The present, the now, must not be too important.”

We at Mobus Creative Negotiating say that the first job of a negotiator is to size up what kind of negotiation they are in. If this is a one-time transaction with someone you will never do business with again, then one set of rules applies: haggle away and use gamesmanship tactics. On the other hand, if you are going to repeat this transaction again and again – if this is part of an on-going relationship – then you need to adjust dramatically. In such repetitive transactions, cooperation makes much more sense.