Third-party arbitration and forgiving strategies increase cooperation when perception errors are common

Humans cooperate in groups in which mutual monitoring is common, and this provides the possibility of third-party arbitration. Third-party arbitration stabilizes reciprocity in at least two ways: first, when it is accurate, it reduces the frequency of misunderstandings resulting from perception errors, and second, even when it is inaccurate, it provides a public signal that allows pairs to align their expectations about how to behave after errors occur. Here, we describe experiments that test for these two effects. We find that in an iterated, sequential Prisoner's Dilemma game with errors, players with the highest average payoffs are those who make use of third-party arbitration and who also employ forgiving strategies. The combination of these two behaviours reduces the detrimental effects of errors on reciprocity, resulting in more cooperation.