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Group Consumption, Free Riding, and Informal Reciprocity Agreements

  • Thomas E. Borcherding

    (Claremont Graduate University)

  • Darren Filson

    (Claremont Graduate University)

We examine conditions under which group consumption is likely to involve informal and tacit reciprocity agreements rather than formal contracts and the price system. Our model shows that informal reciprocity agreements are more likely to be used when transaction costs of formal agreements are high, the good is relatively inexpensive, each consumer's demand is not too responsive to price changes, the group is likely to continue to interact over time, the consumers are patient, the time between interactions is short, and the group is small and homogeneous. Further, the results suggest that informal sharing agreements are more likely to involve goods that are consumed along with other group benefits, such as conversation and companionship. We conclude by analyzing investments in social capital and discussing the effects of deeper social interactions constrained by norm structures on our results.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2000-01.

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Handle: RePEc:clm:clmeco:2000-01
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  1. H. Lorne Carmichael & W. Bentley MacLeod, 1997. "Gift Giving and the Evolution of Cooperation," Boston College Working Papers in Economics 338., Boston College Department of Economics.
  2. Posner, Richard A, 1980. "A Theory of Primitive Society, with Special Reference to Law," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 1-53, April.
  3. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  4. Frank, Robert H, 1992. "Melding Sociology and Economics: James Coleman's Foundations of Social Theory," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 147-70, March.
  5. Becker, Gary S., 1978. "The Economic Approach to Human Behavior," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226041124.
  6. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
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