Book Chapter
Is Co-operation Habit-Forming?

Common sense would suggest people who have cooperated in the past would find it easier to cooperate in the future. This chapter examines a number of issues related to cooperation and trust with regard to individual rationality and formation of collective action institutions, both (game-) theoretically and empirically. A cooperative outcome is one of many equilibria possible in a repeated game (i.e., while each game is unique, players can remember each other's strategies in previous rounds). A player's decision on whether or not to cooperate depends on pay-offs from that cooperation and the degree of trust. Repetition seems to do two things: first, by allowing the possibility of retaliation it transforms the game such that cooperation is rational, and second, because both players now know this, it increases the likelihood that other players will cooperate, and thus, making cooperation individually rational. Some of the conjectures identified from the theoretical model are also examined with data from milk-producers' cooperative societies in the South Indian state of Tamil Nadu. Some policy implications are discussed.