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Group Reputations, Stereotypes, and Cooperation in a Repeated Labor Market

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In a world of incomplete, unenforceable contracts, both reputation effects and fairness concerns have been suggested as mechanisms capable of avoiding or mitigating market failure. Existing experiments show that labor market failure can be avoided in the absence of individual reputations, apparently due to subjects' other-regarding preferences. This paper introduces a reputation equilibrium with stereotyping (modeled as a belief of type correlation) that predicts cooperation even when individual reputations effects are weak. New experiments show that cooperation emerges when such equilibria are likely to exist, but not when existence is unlikely.

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Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 2006-E6.

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Handle: RePEc:cmu:gsiawp:1140898278

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Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
Web page: http://www.tepper.cmu.edu/

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Citations

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Cited by:
  1. MacDonald, James M. & Wu, Steven Y., 2009. "Market Competition, Institutions, and Contracting Outcomes: Preliminary Model and Experimental Results," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 50625, Agricultural and Applied Economics Association.
  2. Bornhorst, Fabian & Ichino, Andrea & Kirchkamp, Oliver & Schlag, Karl & Winter, Eyal, 2010. "Similarities and Differences when Building Trust: the Role of Cultures," CEPR Discussion Papers 7717, C.E.P.R. Discussion Papers.
  3. Gabriele Camera & Marco Casari, 2007. "Cooperation among strangers: an experiment with indefinite interaction," Purdue University Economics Working Papers 1201, Purdue University, Department of Economics.
  4. Hugh Jones, David; Zultan, Ro'i, 2011. "Reputation and Cooperation in Defence," CAGE Online Working Paper Series 52, Competitive Advantage in the Global Economy (CAGE).
  5. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, Open Access Journal, vol. 3(1), pages 56-77, March.
  6. Roe, Brian E. & Wu, Steven Y., 2009. "Do the Selfish Mimic Cooperators? Experimental Evidence from Finitely-Repeated Labor Markets," IZA Discussion Papers 4084, Institute for the Study of Labor (IZA).
  7. David Cooper & E. Dutcher, 2011. "The dynamics of responder behavior in ultimatum games: a meta-study," Experimental Economics, Springer, vol. 14(4), pages 519-546, November.
  8. 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.
  9. Sheremeta, Roman M. & Wu, Steven Y., 2012. "Testing Canonical Tournament Theory: On the Impact of Risk, Social Preferences and Utility Structure," IZA Discussion Papers 6304, Institute for the Study of Labor (IZA).

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