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Rise and Decline of Social Capital

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Abstract

In order to explain excess co-operation in the one-shot prisoner's dilemma game, we first question the standard assumption of stable and selfish preferences by introducing the concept of social capital. This analysis leads to a model that explains excess co-operation through an accumulation of social capital. We allow preferences and norms to change over time and hence endogenise them. Our results depend on individuals being able to acquire enough information to allow them to ascertain the social norm that fellow individuals subscribe to. However, our results do not depend on any assumptions about group size and no ostracism is required to generate co-operation. Our model produces three hypotheses about the emergence and stability of social capital and co-operation in society. First, neither unconditional cooperation nor universal defection is stable; second, for co-operation to be stable some individuals must be reciprocal in nature; third, we identify a 'rise and decline of social capital' which gives a cyclical pattern of co-operation in society. These findings may form the basis for future theoretical and empirical research.

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  • Poulsen, Anders & Svendsen, Gert Tinggaard, 2003. "Rise and Decline of Social Capital," Working Papers 03-10, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2003_010
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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
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    7. repec:cup:apsrev:v:91:y:1997:i:01:p:82-93_23 is not listed on IDEAS
    8. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, January.
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    10. Fehr, Ernst & Gachter, Simon, 1998. "Reciprocity and economics: The economic implications of Homo Reciprocans1," European Economic Review, Elsevier, vol. 42(3-5), pages 845-859, May.
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    Cited by:

    1. Fabio Sabatini, 2004. "Il rapporto tra Economia e Società nella ricerca sul capitale sociale. Un tentativo di impostazione contabile e una classificazione “funzionale” della letteratura," Others 0411005, EconWPA.

    More about this item

    Keywords

    Social capital; co-operation; selfishness; reciprocity; altruism; preference dynamic; Prisoner's Dilemma;

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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