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|
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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.
- Rauch, J E & Watson, Joel, 1999. "Starting Small in an Unfamiliar Environment," University of California at San Diego, Economics Working Paper Series qt4rp145hc, Department of Economics, UC San Diego.
- 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.
- Parikshit Ghosh & Debraj Ray, 1996. "Cooperation in Community Interaction Without Information Flows," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 491-519.
- Sen, Amartya, 1985. "Goals, Commitment, and Identity," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(2), pages 341-355, Fall.
- Paul Milgrom & John Roberts, 1980.
"Predation, Reputation, and Entry Deterrence,"
427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kranton, Rachel E, 1996. "The Formation of Cooperative Relationships," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 214-233, April.
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