Salience and Cooperation Among Rational Egoists
AbstractWe give the conditions for the attainment of self-enforcing Pareto efficiency under complete effort non-observability, strict agent rationality and global budget balance among teams involved in a winner-takes-all contest for a prize. Employing Nash conjectures and fixed fee financing of the prize, we characterize the competitive environment that allows teams to overcome the moral hazard problem and induce self-enforcing egalitarian outcomes. If the number of identical teams is finite, the production technology is restricted to factor symmetric ones. When the number of identical teams becomes unbounded, the restriction on the production technology vanishes and there always exists a fee level that supports a self-enforcing Pareto efficient solution as long as member utilities over own share are identical and obey the Inada conditions. Some form of membership symmetry cannot be ruled out for Pareto efficiency.
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Bibliographic InfoPaper provided by University of the Philippines School of Economics in its series UP School of Economics Discussion Papers with number 201309.
Length: 9 pages
Date of creation: Jul 2013
Date of revision:
Publication status: Published as UPSE Discussion Paper No. 2013-09, July 2013
social dilemma; rational egoist; cooperation; Ostrom threshold;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-10 (All new papers)
- NEP-GTH-2013-08-10 (Game Theory)
- NEP-SOC-2013-08-10 (Social Norms & Social Capital)
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