Sharing compromising information: How crime begets cooperation among criminals

We investigate in how far deviant acts are not only a manifestation of preferences, but also necessitated by the lack of trust and commitment encountered in extra-legal contexts. When people have reasons to distrust one another, as criminals do for instance, they could still cooperate by sharing compromising information with which to blackmail each other and ensure compliance. The content of this information would consist of deviant acts which once credibly revealed trigger punishment by a third party. We pursue this conjecture experimentally, investigating whether even in a basic and artificial setting actors use deviant acts to foster profitable cooperation with each other.

In our experiment, subjects first acquire a label based on how cooperative they are in a series of dyadic interactions with trust at stake. Cooperative subjects obtain the label “dove” and uncooperative subjects obtain the label “hawk.” In the reminder of the experiment, we vary whether subjects’ labels are revealed automatically or by their own choosing. And we vary whether hawks who are made or make themselves known as such, respectively, can be inflicted a monetary penalty.

In the condition in which labels are automatically revealed and without the possibility to inflict a penalty on hawks, we find that doves cooperate with doves and avoid hawks, whereas hawks seek to interact with both doves and hawks but, unlike doves, mostly defect. This pattern hardly changes after subjects are given the choice to reveal their label before each interaction. Although the majority of hawks chooses not to reveal their label and the large majority of doves reveals, those who do not reveal behave like hawks and are treated as such by their interaction partners. Once the possibility to penalize hawks is introduced, doves become less reluctant to interact and cooperate with hawks, but hawks meeting a dove fear the “stick” and prefer to stay out. However, the proportion of hawks who interact and cooperate with each other increases.

Although few in numbers, some hawks understand the strategic advantage of exchanging compromising information by revealing their label, and they do so to cooperate with each other. However, the majority of hawks are less strategic and follow a rather blunt strategy: hide and defect. Our results corroborate Thomas Schelling’s initial idea that compromising information can be conceived as a “hostage” which, when mutually exchanged, makes each party to the interaction vulnerable and therefore trustworthy in joint illicit endeavours.