Instrumental reciprocity as an error

We study the strategies used by experimental subjects in repeated sequential prisoners’ dilemma games to identify the underlying motivations behind instrumental reciprocity—that is, reciprocating cooperation only as long as there is future interaction. Importantly, we designed the games so that instrumental reciprocity is a mistake for payoff-maximizing individuals irrespective of their beliefs. We find that, despite the fact instrumental reciprocity is suboptimal, it
one of the most important reasons why subjects cooperate. Moreover, although the use of instrumental reciprocity is sensitive to the costs of deviating from the payoff-maximizing strategy, these costs alone cannot explain the high frequency with which subjects choose to reciprocate instrumentally.