IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v144y2017icp1-17.html
   My bibliography  Save this article

Investing to cooperate: Theory and experiment

Author

Listed:
  • Benoît, Jean-Pierre
  • Galbiati, Roberto
  • Henry, Emeric

Abstract

We study theoretically and in a lab-experiment investment decisions in environments where property rights are absent. In our setting a player chooses an investment level before interacting repeatedly with a given set of agents. The investment stochastically affects the payoffs of the game in every subsequent period. We show that more volatile returns make investment more difficult in the absence of legal protection, and might force the investor to invest more to guarantee cooperation. Experimental results are broadly consistent with the theoretical findings.

Suggested Citation

  • Benoît, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2017. "Investing to cooperate: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 1-17.
    • Handle: RePEc:eee:jeborg:v:144:y:2017:i:c:p:1-17
    DOI: 10.1016/j.jebo.2017.09.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268117302524
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2017.09.011?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
    2. Agnès Bénassy‐Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, May.
    3. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
    4. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 857-882, December.
    5. Emeric Henry & Carlos J. Ponce, 2011. "Waiting to Imitate: On the Dynamic Pricing of Knowledge," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 959-981.
    6. Elinor Ostrom, 2010. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," American Economic Review, American Economic Association, vol. 100(3), pages 641-672, June.
    7. Emeric Henry & Francisco Ruiz-Aliseda, 2016. "Keeping Secrets: The Economics of Access Deterrence," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 95-118, August.
    8. James Bessen & Robert M. Hunt, 2007. "An Empirical Look at Software Patents," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 157-189, March.
    9. Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 317-344, November.
    10. Pedro Dal Bó, 2007. "Tacit collusion under interest rate fluctuations," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 533-540, June.
    11. Anna Dreber & David G. Rand & Drew Fudenberg & Martin A. Nowak, 2008. "Winners don’t punish," Nature, Nature, vol. 452(7185), pages 348-351, March.
    12. Marina Halac, 2015. "Investing in a relationship," RAND Journal of Economics, RAND Corporation, vol. 46(1), pages 165-185, March.
    13. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    14. Gabriele Camera & Marco Casari, 2009. "Cooperation among Strangers under the Shadow of the Future," American Economic Review, American Economic Association, vol. 99(3), pages 979-1005, June.
    15. Roderick Duncan, 2006. "Price or politics? An investigation of the causes of expropriation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 85-101, March.
    16. Michele Boldrin & David K Levine, 2005. "Intellectual Property and the Efficient Allocation of Surplus from Creation," Levine's Working Paper Archive 618897000000000925, David K. Levine.
    17. Michele Boldrin & David Levine, 2002. "The Case Against Intellectual Property," American Economic Review, American Economic Association, vol. 92(2), pages 209-212, May.
    18. Garey Ramey & Joel Watson, 1997. "Contractual Fragility, Job Destruction, and Business Cycles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 873-911.
    19. Ruiz-Aliseda, Francisco, 2012. "Innovation Beyond Patents: Technological Complexity as a Protection against Imitation," CEPR Discussion Papers 8870, C.E.P.R. Discussion Papers.
    20. Pedro Dal Bo & Guillaume R. Frochette, 2011. "The Evolution of Cooperation in Infinitely Repeated Games: Experimental Evidence," American Economic Review, American Economic Association, vol. 101(1), pages 411-429, February.
    21. Mr. Thomas William Dorsey & Ms. Zuzana Brixiova & Sukhwinder Singh & Mr. Helaway Tadesse, 2008. "The Landscape of Capital Flows to Low-Income Countries," IMF Working Papers 2008/051, International Monetary Fund.
    22. Boldrin,Michele & Levine,David K., 2010. "Against Intellectual Monopoly," Cambridge Books, Cambridge University Press, number 9780521127264.
    23. James J. Anton & Dennis A. Yao, 2002. "The Sale of Ideas: Strategic Disclosure, Property Rights, and Contracting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 513-531.
    24. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09iatr32p81 is not listed on IDEAS
    25. Aoyagi, Masaki & Fréchette, Guillaume, 2009. "Collusion as public monitoring becomes noisy: Experimental evidence," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1135-1165, May.
    26. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    27. Duncan, Roderick, 2006. "Price or politics? An investigation of the causes of expropriation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 1-17, March.
    28. Pedro Dal Bó, 2005. "Cooperation under the Shadow of the Future: Experimental Evidence from Infinitely Repeated Games," American Economic Review, American Economic Association, vol. 95(5), pages 1591-1604, December.
    29. Spagnolo, Giancarlo & Potters, Jan & Bigoni, Maria, 2012. "Flexibility and Collusion with Imperfect Monitoring," CEPR Discussion Papers 8877, C.E.P.R. Discussion Papers.
    30. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-548, June.
    31. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iatr32p81 is not listed on IDEAS
    32. Jean-Pierre Benoit, 1985. "Innovation and Imitation in a Duopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 99-106.
    33. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Casoria, Fortuna & Ciccone, Alice, 2021. "Do upfront investments increase cooperation? A laboratory experiment," European Economic Review, Elsevier, vol. 140(C).
    2. Nguyen, Thi Phuong Thao & Huang, Fang & Tian, Xiaowen, 2023. "Intellectual property protection need as a driver for open innovation: Empirical evidence from Vietnam," Technovation, Elsevier, vol. 123(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:spmain:info:hdl:2441/59r8grug28881rf8or7715f88g is not listed on IDEAS
    2. repec:hal:spmain:info:hdl:2441/d3pr45c1e8egae1q88dc5jo6u is not listed on IDEAS
    3. Benoit, Jean-Pierre & Galbiati, Roberto, 2013. "Rational parasites," CEPR Discussion Papers 9351, C.E.P.R. Discussion Papers.
    4. Benoît, Jean-Pierre & Galbiati, Roberto & Henry, Emeric, 2017. "Investing to cooperate: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 1-17.
    5. Emeric Henry & Carlos J. Ponce, 2008. "Waiting to Copy: On the Dynamics of the Market for Technology," Working Papers hal-01066192, HAL.
    6. Camera, Gabriele & Casari, Marco & Bigoni, Maria, 2012. "Cooperative strategies in anonymous economies: An experiment," Games and Economic Behavior, Elsevier, vol. 75(2), pages 570-586.
    7. Jones, Matthew T., 2014. "Strategic complexity and cooperation: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 352-366.
    8. repec:hal:spmain:info:hdl:2441/10121 is not listed on IDEAS
    9. repec:spo:wpecon:info:hdl:2441/10121 is not listed on IDEAS
    10. Rand, David G. & Fudenberg, Drew & Dreber, Anna, 2015. "It's the thought that counts: The role of intentions in noisy repeated games," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 481-499.
    11. Pedro Dal Bó & Guillaume R. Fréchette, 2019. "Strategy Choice in the Infinitely Repeated Prisoner's Dilemma," American Economic Review, American Economic Association, vol. 109(11), pages 3929-3952, November.
    12. repec:hal:wpspec:info:hdl:2441/10121 is not listed on IDEAS
    13. Ruiz-Aliseda, Francisco, 2012. "Innovation Beyond Patents: Technological Complexity as a Protection against Imitation," CEPR Discussion Papers 8870, C.E.P.R. Discussion Papers.
    14. Bigoni, Maria & Camera, Gabriele & Casari, Marco, 2020. "Money is more than memory," Journal of Monetary Economics, Elsevier, vol. 110(C), pages 99-115.
    15. Heller, Yuval & Tubul, Itay, 2023. "Strategies in the repeated prisoner’s dilemma: A cluster analysis," MPRA Paper 117444, University Library of Munich, Germany.
    16. Emeric Henry & Carlos J. Ponce, 2011. "Waiting to Imitate: On the Dynamic Pricing of Knowledge," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 959-981.
    17. Wu, Steven Y., 2021. "Determinants of Relational Contract Performance: Experimental Evidence," 2021 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 3-5, 2021, San Diego, California 308455, Agricultural and Applied Economics Association.
    18. Pedro Dal Bo & Guillaume R. Frochette, 2011. "The Evolution of Cooperation in Infinitely Repeated Games: Experimental Evidence," American Economic Review, American Economic Association, vol. 101(1), pages 411-429, February.
    19. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m0533i43h is not listed on IDEAS
    20. Kamei, Kenju, 2015. "Endogenous Reputation Formation: Cooperation and Identity under the Shadow of the Future," MPRA Paper 61657, University Library of Munich, Germany.
    21. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m0533i43h is not listed on IDEAS
    22. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iatr32p81 is not listed on IDEAS
    23. Duffy, John & Xie, Huan, 2016. "Group size and cooperation among strangers," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 55-74.
    24. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8gkjgsq3 is not listed on IDEAS
    25. Lepp l , Samuli, 2013. "Arrow's paradox and markets for nonproprietary information," Cardiff Economics Working Papers E2013/2, Cardiff University, Cardiff Business School, Economics Section.
    26. Ghidoni, Riccardo & Cleave, Blair L. & Suetens, Sigrid, 2019. "Perfect and imperfect strangers in social dilemmas," European Economic Review, Elsevier, vol. 116(C), pages 148-159.
    27. Tag, Mehmet Nasih, 2021. "Judicial institutions of property rights protection and foreign direct investment inflows," International Review of Law and Economics, Elsevier, vol. 65(C).
    28. Mohamed MABROUKI, 2018. "What Kind Of Intellectual Propfrty Regime Is More Favorable To Innovation: With Or Without A Patent?," Journal of Smart Economic Growth, , vol. 3(1), pages 77-95, Juin.
    29. Emeric Henry & Carlos J. Ponce, 2008. "Waiting to Copy: On the Dynamics of the Market for Technology," Levine's Working Paper Archive 814577000000000030, David K. Levine.

    More about this item

    Keywords

    Investment; Experiments; Repeated games; Property rights;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:144:y:2017:i:c:p:1-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.