Abstract
Societies today face important challenges related to cooperation, which is needed among individuals who interact at a nonregular frequency. In this context, cooperation can be sustained if social norms push in this direction. We design an online experiment in which participants make strategic choices in an infinitely socially iterated prisoner’s dilemma. We examine the effects of inequality on social norms of cooperation and how norm compliance, in turn, affects cooperation. Inequality exists when two participants defect and cooperation gives equal payoffs in one treatment or keeps the unequal payoffs in the other. The results show that inequality weakens social norms by limiting first- and second-order normative beliefs about cooperation as well as descriptive beliefs about the other participants’ cooperation. Inequality reduces the likelihood of cooperation mainly driven by the change in social norms. Overall, the mere existence of inequality causes these changes, not specific behaviors, depending on the participants’ type.