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Group consumption, free-riding, and informal reciprocity agreements

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  • Borcherding, Thomas E.
  • Filson, Darren

Abstract

We examine conditions under which group consumption is likely to involve informal and tacit reciprocity agreements rather than formal contracts and the price system. Our model shows that informal reciprocity agreements are more likely to be used when transaction costs of formal agreements are high, the good is relatively inexpensive, each consumer's demand is not too responsive to price changes, the group is likely to continue to interact over time, the consumers are patient, the time between interactions is short, and the group is small and homogeneous. Further, the results suggest that informal sharing agreements are more likely to involve goods that are consumed along with other group benefits, such as conversation and companionship. We conclude by analyzing investments in social capital and discussing the effects of deeper social interactions constrained by norm structures on our results.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 47 (2002)
Issue (Month): 3 (March)
Pages: 237-257

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Handle: RePEc:eee:jeborg:v:47:y:2002:i:3:p:237-257

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  1. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  2. Becker, Gary S., 1978. "The Economic Approach to Human Behavior," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226041124, October.
  3. Posner, Richard A, 1980. "A Theory of Primitive Society, with Special Reference to Law," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 1-53, April.
  4. Frank, Robert H, 1992. "Melding Sociology and Economics: James Coleman's Foundations of Social Theory," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 147-70, March.
  5. H. Lorne Carmichael & W. Bentley MacLeod, 1997. "Gift Giving and the Evolution of Cooperation," Boston College Working Papers in Economics 338., Boston College Department of Economics.
  6. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
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Cited by:
  1. Matt Lindsay & Robert Deacon & Darren Filson, 2014. "Tom Borcherding," Public Choice, Springer, vol. 160(1), pages 1-6, July.
  2. Luigino Bruni & Luca Stanca, 2005. "Watching alone: Relational Goods, Television and Happiness," Working Papers 90, University of Milano-Bicocca, Department of Economics, revised Jun 2005.

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