On The Economic Value of Repeated Interactions Under Adverse Selection
The paper studies, in a repeated interaction setting, how the presence of cooperative agents in a heterogeneous community organized in groups affects efficiency and group stability. The paper expands on existing literature by assuming that each type can profitably mimic other types. It is shown that such enlargement of profitable options prevents group stabilization in the single group case. Stabilization can be obtained with many groups, but its driver is not the efficiency gain due to the presence of cooperative individuals. Rather, stabilization is the result of free riding opportunities.
|Date of creation:||May 2006|
|Date of revision:|
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- Rauch, James E. & Watson, Joel, 2003.
"Starting small in an unfamiliar environment,"
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- James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," Cowles Foundation Discussion Papers 1218, Cowles Foundation for Research in Economics, Yale University.
- James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," NBER Working Papers 7053, National Bureau of Economic Research, Inc.
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- Sen, Amartya, 1985. "Goals, Commitment, and Identity," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(2), pages 341-55, Fall.
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