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Ranking Friends

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  • Feinberg, Yossi

    (Stanford University)

  • Kets, Willemien

    (Northwestern University)

Abstract

We investigate the scope for cooperation within a community engaged in repeated reciprocal interactions. Players seek the help of others and approach them sequentially according to some fixed order, that is, a ranking profile. We study the ranking profiles that are most effective in sustaining cooperation in equilibrium, that is, profiles that support full cooperation in equilibrium under the largest set of parameters. These are the profiles that spread the costs of helping others equally among the members of the community. We show that, generically, these socially optimal ranking profiles correspond to Latin squares--profiles in which each player appears in a given position exactly once in other players' list. In addition, we study equilibria with bilateral enforcement in which only the victims punish non-cooperating deviators. We show that the Latin squares in which every two players rank each other at the same position can sustain cooperation for the widest range of parameters in this case.

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Bibliographic Info

Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 2127.

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Date of creation: Dec 2012
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Handle: RePEc:ecl:stabus:2127

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  1. Michi Kandori, 2010. "Social Norms and Community Enforcement," Levine's Working Paper Archive 630, David K. Levine.
  2. Glen Ellison, 2010. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Levine's Working Paper Archive 631, David K. Levine.
  3. Lippert, Steffen & Spagnolo, Giancarlo, 2011. "Networks of relations and Word-of-Mouth Communication," Games and Economic Behavior, Elsevier, vol. 72(1), pages 202-217, May.
  4. Mihm, Maximilian & Toth, Russell & Lang, Corey, 2009. "What Goes Around Comes Around: A Theory of Indirect Reciprocity in Networks," Working Papers 09-07, Cornell University, Center for Analytic Economics.
  5. Lippert, Steffen & Spagnolo, Giancarlo, 2004. "Networks of Relations," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 28, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Matthew O. Jackson & Tomas Rodriguez-Barraquer & Xu Tan, 2012. "Social Capital and Social Quilts: Network Patterns of Favor Exchange," American Economic Review, American Economic Association, vol. 102(5), pages 1857-97, August.
  7. David A. Miller & S. Nageeb Ali, 2009. "Enforcing Cooperation in Networked Societies," 2009 Meeting Papers 115, Society for Economic Dynamics.
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