Contract Enforcement by the Gods
AbstractWe propose a theory that explains why rational agents start to believe in a causal relationship between unrelated events. Agents send and collect messages through a communication network. If they are convinced of a relationship between two events, they send messages confirming their belief with higher probability than messages contradicting it. The network aggregates this communication bias over individuals. Therefore, agents may find a strong relationship between unrelated events even if the communication bias is very small. We apply this model to an informal economy where the fear of punishment by supernatural forces prevents agents from cheating others. --
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Bibliographic InfoPaper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Hannover 2010 with number 11.
Date of creation: 2010
Date of revision:
Informal Contract Enforcement; Communication; Learning; Networks;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-GTH-2010-09-25 (Game Theory)
- NEP-MIC-2010-09-25 (Microeconomics)
- NEP-NET-2010-09-25 (Network Economics)
- NEP-SOC-2010-09-25 (Social Norms & Social Capital)
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