Collaborating at the Tower of Babel: The Meaning of Cooperation and the Foundations of Long-Term Exchange

Abstract

This dissertation is the first to propose and validate a general process by which exchange partners arrive at a shared understanding of what actions constitute (vs. defection) in changing and complex environments, thereby making cooperation possible. Achieving cooperation in the face of incentives to defect is essential in organizations and markets. Past research has focused on the payoff structure and the resulting risk of defection as a determinant of cooperative outcomes but has failed to explain how exchange partners arrive at shared understandings of what actions constitute cooperation and defection, and why exchanges featuring the same payoff structure sometimes have different cooperative outcomes. I resolve this puzzle and explain how and when exchange partners can coordinate on the meaning of cooperation. I do so by advancing and testing a theory of shared coordination frameworks – developed through long-term exchange – that help exchange partners reach common interpretations of cooperation when unanticipated events inevitably occur. I then provide theoretical clarification for the prevalence of long-term exchange, by demonstrating the causal primary of shared frameworks in actors’ decisions to exchange with long-term partners. I validate these propositions using a novel experimental platform that is the first to manipulate participants’ coordination frameworks and disentangle their effect from the risk of defection and other correlates of long-term exchange. The results indicate that shared coordination frameworks dramatically increase the likelihood of successful cooperation in complex exchanges.