Social preferences, positive expectations, and trust based cooperation

Some accounts of cooperation in the Prisoner's Dilemma have focused on developing simple indexes of a game's severity  -i.e., the degree to which a game promotes non-cooperative choices-which are derived wholly from the game's payoff structure. However, the psychological mechanisms of why a game's payoffs affect cooperation rates are not clearly explicated with this approach. We show how simple models of decision making can predict the emergence of trust based cooperation as the expected utility maximizing strategy when individual social preferences and positive expectations (beliefs) are simultaneously taken into account. Moreover, we show how these predictions relate to a particular game's index of cooperation. We then delineate under what conditions trust based cooperation is rationalizable, and how the decision to trust can be understood in terms of an interaction between payoffs, preferences, and beliefs.