Trust in Cohesive Communities
AbstractThis paper investigates the social structures that maximize trust and cooperation when agreements are implicitly enforced. We study a repeated trust game in which the social network determines the information transmission technology. We show that cohesive communities, modeled as social networks of complete components, emerge as the optimal community design. Cohesive communities generate some degree of common knowledge of transpired play that allows players to coordinate their punishments and, as a result, yield relatively high equilibrium payo s. Our results provide an economic rationale for the commonly argued optimality of cohesive social networks.
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Bibliographic InfoPaper provided by Facultad de Economía y Empresa, Universidad Diego Portales in its series Working Papers with number 40.
Date of creation: Jun 2013
Date of revision:
Other versions of this item:
- NEP-ALL-2013-10-05 (All new papers)
- NEP-CDM-2013-10-05 (Collective Decision-Making)
- NEP-EVO-2013-10-05 (Evolutionary Economics)
- NEP-GTH-2013-10-05 (Game Theory)
- NEP-MIC-2013-10-05 (Microeconomics)
- NEP-NET-2013-10-05 (Network Economics)
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