Conspiracy against the public - An experiment on collusion

We study to what extent collusive behavior is affected by the awareness of negative externalities. Theories outcome-based social preferences suggest that externalities make collusion harder sustain than predicted standard economic theory, while sociological theories ties and intergroup comparisons bilateral cooperation can be strengthened if there exist outsiders gain from cooperative break down. investigate this in a laboratory experiment. Subjects play infinitely repeated prisoner's dilemma with without externality. The externality implemented letting subjects positive contribution public good they choose deviate between two, i.e. since gains are at expense public. find tends increase behavior. Initially, level lower, but as experience observe their partners cooperate despite externality, least much baseline treatment.