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The coordination value of monetary exchange: Experimental evidence

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  • G. Camera
  • M. Casari

Abstract

Under what conditions can cooperation be sustained in a network of strangers? Here we study the role of institutions and uncover a new behavioral foundation for the use of monetary systems. In an experiment, anonymous subjects could cooperate or defect in bilateral random encounters. This sequence of encounters was indefinite; hence multiple equilibria were possible, including full intertemporal cooperation supported by a social norm based on community punishment of defectors. We report that such social norm did not emerge. Instead, the availability of intrinsically worthless tokens favored the coordination on intertemporal cooperation in ways that networks of strangers were unable to achieve through social norms.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp754.

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Date of creation: May 2011
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Handle: RePEc:bol:bodewp:wp754

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Cited by:
  1. Daniela Puzzello & Brit Grosskpof & John Duffy, 2011. "Gift Exchange versus Monetary Exchange: Experimental Evidence," 2011 Meeting Papers 1153, Society for Economic Dynamics.
  2. John Duffy, 2011. "Gift Exchange versus Monetary Exchange: Theory and Evidence," Working Papers 449, University of Pittsburgh, Department of Economics, revised Nov 2011.

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