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 group efficiency and stability. The paper extends the 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. Instead stabilization is the result of free riding opportunities.
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- James E. Rauch & Joel Watson, 1999.
"Starting Small in an Unfamiliar Environment,"
NBER Working Papers
7053, National Bureau of Economic Research, Inc.
- 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.
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"Predation, Reputation, and Entry Deterrence,"
427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Ghosh, Parikshit & Ray, Debraj, 1996.
"Cooperation in Community Interaction without Information Flows,"
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Wiley Blackwell, vol. 63(3), pages 491-519, July.
- 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.
- Kranton, Rachel E, 1996. "The Formation of Cooperative Relationships," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 214-33, April.
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