Abstract

We study the emergence of cooperation in dynamic, anonymous social networks, such as in online communities. We examine prisoner’s dilemma played under a social matching protocol, where individuals form random links to partners with whom they can interact. Cooperation results in mutual benefits, whereas defection results in a high short-term gain. Moreover, an agent that defects can escape reciprocity by virtue of anonymity: it is always possible for an agent to abandon his history and re-enter the network as a new user. We find that cooperation is sustainable at equilibrium in such a model. Indeed, cooperation allows an individual to interact with an increasing number of other cooperators, resulting in the formation of a type of social capital. This process arises endogenously, without the need for potentially harmful social enforcement rules. Additionally, for a rich class of parameter settings, our model predicts a stable coexistence of cooperating and defecting agents at equilibrium.