Labor union members play an OLG repeated game.

Humans are capable of cooperating with one another even when it is costly and a deviation provides an immediate gain. An important reason is that cooperation is reciprocated or rewarded and deviations are penalized in later stages. For cooperation to be sustainable, not only must rewards and penalties be strong enough but individuals should also have the right incentives to provide rewards and punishments. Codes of conduct with such properties have been studied extensively in game theory (as repeated game equilibria), and the literature on the evolution of cooperation shows how equilibrium behavior might emerge and proliferate in society. We found that community unions, a subclass of labor unions that admits individual affiliations, are ideal to corroborate these theories with reality, because (i) their activities are simple and (ii) they have a structure that closely resembles a theoretical model, the overlapping generations repeated game. A detailed case study of a community union revealed a possible equilibrium that can function under the very limited observability in the union. The equilibrium code of conduct appears to be a natural focal point based on simple heuristic reasoning. The union we studied was created out of necessity for cooperation, without knowing or anticipating how cooperation might be sustained. The union has successfully resolved about 3,000 labor disputes and created a number of offspring.