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,"
Cowles Foundation Discussion Papers
1218, Cowles Foundation for Research in Economics, Yale University.
- 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.
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Levine's Working Paper Archive
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Boston University - Institute for Economic Development
64, Boston University, Institute for Economic Development.
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