Stable cooperation emerges in stochastic multiplicative growth

Understanding the evolutionary stability of cooperation is a central problem in biology, sociology, and economics. There exist only a few known mechanisms that guarantee the existence of cooperation and its robustness to cheating. Here, we introduce a mechanism for the emergence of cooperation in the presence of fluctuations. We consider agents whose wealth changes stochastically in a multiplicative fashion. Each agent can share part of her wealth as a public good, which is equally distributed among all the agents. We show that, when agents operate with long-time horizons, cooperation produces an advantage at the individual level, as it effectively screens agents from the deleterious effect of environmental fluctuations.