Cooperation and Self-Governance in Heterogeneous Communities
AbstractThis paper theoretically studies the consequences of heterogeneity on self-governance, cooperation, and trust in large communities. I consider a game model where players belong to a large population and are randomly matched. Players interact with each other infrequently and, when matched, play a prisoners’ dilemma. There exists an institution that can convey information on play histories. Players’ payoff functions differ, so that some players have a higher tendency towards cooperation. This constitutes the main modeling innovation of this work and makes the model a mixed adverse selection-moral hazard model. A suitable equilibrium concept is introduced and characterized. Some novel comparative statics results are obtained, showing, in sharp contrast with previous papers, that more heterogeneous societies may sustain more cooperation. Private enforcement mechanisms are explored, showing conditions under which private for profit intermediation leads to Pareto optimal cooperation. We discuss the implications of my results for applied work and show how the disclosure of credit histories impacts the defection rates of credit relations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 07-038.
Date of creation: Mar 2008
Date of revision:
Large communities; cooperation; heterogeneity; social capital; trust; reputation;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan Levin, 2001.
"Information and the Market for Lemons,"
01004, Stanford University, Department of Economics.
- DANIEL B. KLElN, 1992. "Promise Keeping In The Great Society: A Model Of Credit Information Sharing," Economics and Politics, Wiley Blackwell, vol. 4(2), pages 117-136, 07.
- Szeidl, Adam & Rosenblat, Tanya & Mobius, Markus & Karlan, Dean, 2009.
"Trust and Social Collateral,"
3051620, Harvard University Department of Economics.
- Markus Mobius & Adam Szeidl, 2007. "Trust and Social Collateral," NBER Working Papers 13126, National Bureau of Economic Research, Inc.
- Karlan, Dean & Mobius, Markus & Rosenblat, Tanya & Szeidl, Adam, 2009. "Trust and Social Collateral," Staff General Research Papers 13026, Iowa State University, Department of Economics.
- Ghosh, Parikshit & Ray, Debraj, 1996.
"Cooperation in Community Interaction without Information Flows,"
Review of Economic Studies,
Wiley Blackwell, vol. 63(3), pages 491-519, July.
- Parikshit Ghosh & Debraj Ray, 1995. "Cooperation in Community Interaction Without Information Flows," Boston University - Institute for Economic Development 64, Boston University, Institute for Economic Development.
- Kandori, Michihiro, 1992.
"Social Norms and Community Enforcement,"
Review of Economic Studies,
Wiley Blackwell, vol. 59(1), pages 63-80, January.
- Haag, Matthew & Roger Lagunoff, 2003.
"On the Size and Structure of Group Cooperation,"
Royal Economic Society Annual Conference 2003
97, Royal Economic Society.
- Matthew Haag & Roger Lagunoff, 2002. "On the Size and Structure of Group Cooperation," Game Theory and Information 0209005, EconWPA.
- Matthew Haag & Roger Lagunoff, 2002. "On the Size and Structure of Group Cooperation," Wallis Working Papers WP33, University of Rochester - Wallis Institute of Political Economy.
- Matthew Haag & Roger Lagunoff, 2010. "On the Size and Structure of Group cooperation," Levine's Working Paper Archive 506439000000000043, David K. Levine.
- Haag, Matthew & Lagunoff, Roger, 2002. "On the Size and Structure of Group Cooperation," The Warwick Economics Research Paper Series (TWERPS) 650, University of Warwick, Department of Economics.
- Matthew Haag & Roger Lagunoff, 2003. "On the Size and Structure of Group Cooperation," Working Papers 2003.54, Fondazione Eni Enrico Mattei.
- Jappelli, Tullio & Pagano, Marco, 1991.
"Information Sharing in Credit Markets,"
CEPR Discussion Papers
579, C.E.P.R. Discussion Papers.
- Robert M. Hunt, 2002. "What's in the file? The economics and law of consumer credit bureaus," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 17-25.
- Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
- Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
- Echenique, Federico & Sabarwal, Tarun, 2003. "Strong comparative statics of equilibria," Games and Economic Behavior, Elsevier, vol. 42(2), pages 307-314, February.
- Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
- Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
- Steven Tadelis, 2002. "The Market for Reputations as an Incentive Mechanism," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 854-882, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Shor).
If references are entirely missing, you can add them using this form.