The industrial organization of transactions has changed dramatically during the past decade (Thompson and Wright, 1988). Several scholars have discussed and documented the phenomenon of what has been called `the shrinking organization'' (Ford and Farmer, 1986; Lichtenberg, 1992). The apparent failure of `hierarchies'' has been accompanied with the growing importance of cooperation in modern business. The latter poses a serious challenge to managers, especially in the Western world. The reason is that American and European managers are educated to be competitive and to maximize their self-interested objectives (Frank, Gilovich and Regan, 1993). Moreover, cooperation is not socially embedded in these societies - as this is, for instance, the case in Japan. The purpose of this paper is to contribute to the understanding of the determinants of cooperative behavior. Until now, most scholars have concentrated on macro-determinants, such as differences between the Western world and Japan (e.g., Kawasaki and McMillan, 1986). Less attention has been given to the underlying micro-mechanisms. More specifically, we argue that individuals differ as to their inclination to cooperate. To explore this issue, we conducted an experiment at the University of Limburg (Maastricht, The Netherlands). The main part of this paper is devoted to the investigation of the effect of subjective and objective individual differences on competitive versus cooperative behavior in five Prisoner''s Dilemma games. As far as subjective characteristics of individuals are concerned, the paper deals with four personality traits: locus of control, self-monitoring, type-A behavior and sensation seeking. Next, we report results on the influence of objective factors - notably gender, age and prior knowledge of the self-interest model of economics. In addition, the conditions of the five games were varied to analyze the role of a number of situational determinants in explaining (non-)cooperative behavior. In this respect, the predictions which follow immediately from established game theory will be contrasted with the findings of previous experimental research. Finally, the implications of our findings are discussed.
