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Building Routines: Learning, Cooperation, and the Dynamics of Incomplete Relational Contracts

  • Sylvain Chassang

This paper studies how agents with conflicting interests learn to cooperate when the details of cooperation are not common knowledge. It considers a repeated game in which one player has incomplete information about when and how her partner can provide benefits. Initially, monitoring is imperfect and cooperation requires inefficient punishment. As the players' common history grows, the uninformed player can learn to monitor her partner's actions, which allows players to establish more efficient cooperative routines. Because revealing information is costly, it may be optimal not to reveal all the existing information, and efficient equilibria can be path-dependent. (JEL C73, D82, D83, D86)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.1.448
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File URL: http://www.aeaweb.org/aer/data/mar2010/20080226_app.pdf
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 1 (March)
Pages: 448-65

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:1:p:448-65
Note: DOI: 10.1257/aer.100.1.448
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  1. Shalev Jonathan, 1994. "Nonzero-Sum Two-Person Repeated Games with Incomplete Information and Known-Own Payoffs," Games and Economic Behavior, Elsevier, vol. 7(2), pages 246-259, September.
  2. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Ricardo Alonso & Niko Matouschek, 2007. "Relational delegation," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1070-1089, December.
  4. Kyle Bagwell, 2004. "Collusion and Price Rigidity," Theory workshop papers 658612000000000081, UCLA Department of Economics.
  5. Ricardo Alonso & Niko Matouschek, 2007. "Relational delegation," LSE Research Online Documents on Economics 58668, London School of Economics and Political Science, LSE Library.
  6. Watson, Joel, 1999. "Starting Small and Commitment," University of California at San Diego, Economics Working Paper Series qt37p340fc, Department of Economics, UC San Diego.
  7. Blume, Andreas & Franco, April Mitchell, 2007. "Decentralized learning from failure," Journal of Economic Theory, Elsevier, vol. 133(1), pages 504-523, March.
  8. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
  9. Thomas Wiseman, 2005. "A Partial Folk Theorem for Games with Unknown Payoff Distributions," Econometrica, Econometric Society, vol. 73(2), pages 629-645, 03.
  10. repec:cor:louvrp:-636 is not listed on IDEAS
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