Reputations for treatment of outgroup members can prevent the emergence of political segregation in cooperative networks.

Reputation systems promote cooperation and tie formation in social networks. But how reputations affect cooperation and the evolution of networks is less clear when societies are characterized by fundamental, identity-based, social divisions like those centered on politics in the contemporary U.S. Using a large web-based experiment with participants (N = 1073) embedded in networks where each tie represents the opportunity to play a dyadic iterated prisoners' dilemma, we investigate how cooperation and network segregation varies with whether and how reputation systems track behavior toward members of the opposing political party (outgroup members). As predicted, when participants know others' political affiliation, early cooperation patterns show ingroup favoritism. As a result, networks become segregated based on politics. However, such ingroup favoritism and network-level political segregation is reduced in conditions in which participants know how others behave towards participants from both their own party and participants from the other party. These findings have implications for our understanding of reputation systems in polarized contexts.