Cooperation with Network Monitoring

This paper studies the maximum level of cooperation that can be sustained in perfect Bayesian equilibrium in repeated games with network monitoring, where players observe each other's actions either perfectly or not at all. The foundational result is that the maximum level of cooperation can be robustly sustained in grim trigger strategies. If players are equally well monitored, comparative statics on the maximum level of cooperation are highly tractable and depend on the monitoring technology only through a simple statistic, its effective contagiousness. Typically, cooperation in the provision of pure public goods is greater in larger groups, while cooperation in the provision of divisible public goods is greater in smaller groups, and making monitoring less uncertain in the second-order stochastic dominance sense increases cooperation. For fixed monitoring networks, a new notion of network centrality is developed, which determines which players cooperate more in a given network, as well as which networks support greater cooperation. Copyright , Oxford University Press.

[1]  Debraj Ray,et al.  Bureau for Research and Economic Analysis of DevelopmentInformal Insurance in Social Networks , 2005 .

[2]  Olivier Compte.  Communication in repeated games with imperfect private monitoring , 1998 .

[3]  Stephen Morris,et al.  Repeated Games with Almost-Public Monitoring , 2002, J. Econ. Theory.

[4]  A. Greif.  Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition , 1993 .

[5]  A. Greif.  Institutions and the Path to the Modern Economy: Lessons from Medieval Trade , 2006 .

[6]  R. Kranton,et al.  Strategic Interaction and Networks , 2010 .

[7]  David A. Miller,et al.  Enforcing Cooperation in Networked Societies , 2013 .

[8]  M. Laclau,et al.  Communication in Repeated Network Games with Imperfect Monitoring , 2012 .

[9]  Yves Guéron.  Failure of gradualism under imperfect monitoring , 2015, J. Econ. Theory.

[10]  Attila Ambrus,et al.  Consumption Risk-Sharing in Social Networks , 2010 .

[11]  Glenn Ellison.  Cooperation in the Prisoner's Dilemma with Anonymous Random Matching , 1994 .

[12]  M. Olson,et al.  The Logic of Collective Action , 1965 .

[13]  G. Brady.  Governing the Commons: The Evolution of Institutions for Collective Action , 1993 .

[14]  Michele Piccione,et al.  Efficiency in repeated games with local interaction and uncertain local monitoring , 2012 .

[15]  Tristan Tomala,et al.  Repeated proximity games , 1998, Int. J. Game Theory.

[16]  Takuo Sugaya.  Folk Theorem in Repeated Games with Private Monitoring , 2011 .

[17]  M. Mobius,et al.  Trust and Social Collateral , 2007 .

[18]  Takuo Sugaya,et al.  Coordination Failure in Repeated Games with Private Monitoring , 2011 .

[19]  Mary Kay Gugerty,et al.  Ethnic diversity, social sanctions, and public goods in Kenya , 2005 .

[20]  Arun G. Chandrasekhar,et al.  The Diffusion of Microfinance , 2012, Science.

[21]  Dilip Mookherjee,et al.  Norms, Third-Party Sanctions, and Cooperation , 1990 .

[22]  Dilip Abreu.  On the Theory of Infinitely Repeated Games with Discounting , 1988 .

[23]  Antoni Calvó-Armengol,et al.  Centre De Referència En Economia Analítica Barcelona Economics Working Paper Series Working Paper Nº 178 Who's Who in Networks. Wanted: the Key Player Who's Who in Networks. Wanted: the Key Player Barcelona Economics Wp Nº 178 , 2022 .

[24]  T. L. Schwartz.  The Logic of Collective Action , 1986 .

[25]  Yann Bramoullé,et al.  Public goods in networks , 2007, J. Econ. Theory.

[26]  Dean Karlan,et al.  Community Size and Network Closure , 2007 .

[27]  J. Coleman.  Foundations of Social Theory , 1990 .

[28]  Roger Lagunoff,et al.  On the Size and Structure of Group Cooperation , 2003, J. Econ. Theory.

[29]  Michihiro Kandori,et al.  Private Observation, Communication and Collusion , 1998 .

[30]  Satoru Takahashi,et al.  Contagion and uninvadability in local interaction games: The bilingual game and general supermodular games , 2015, J. Econ. Theory.

[31]  M. Jackson,et al.  Social Capital and Social Quilts: Network Patterns of Favor Exchange , 2011 .

[32]  Rachel Kranton,et al.  Risk-Sharing Networks , 2005 .

[33]  Johannes Hörner,et al.  The folk theorem for games with private almost-perfect monitoring , 2005 .

[34]  Barry R. Weingast,et al.  Coordination, Commitment, and Enforcement: The Case of the Merchant Guild , 1994, Journal of Political Economy.

[35]  Michihiro Kandori.  Social Norms and Community Enforcement , 1992 .

[36]  S. Morris,et al.  Coordination Failure in Repeated Games with Almost-Public Monitoring , 2004 .

[37]  R. Putnam,et al.  Making Democracy Work: Civic Traditions in Modern Italy. , 1994 .

[38]  Kevin Quigley,et al.  Making democracy work: Civic traditions in modern Italy , 1996 .

[39]  Joyee Deb.  Cooperation and Community Responsibility: A Folk Theorem for Repeated Matching Games with Names , 2007 .

[40]  Satoru Takahashi,et al.  Community enforcement when players observe partners' past play , 2010, J. Econ. Theory.

[41]  Dilip Mookherjee,et al.  Institutional Structure and the Logic of Ongoing Collective Action , 1987, American Political Science Review.

[42]  J. Ledyard.  Public Goods: A Survey of Experimental Research , 1994 .

[43]  Elchanan Ben-Porath,et al.  Communication in Repeated Games with Private Monitoring , 1996 .

[44]  Paul R. Milgrom,et al.  The role of institutions in the revival of trade: the law merchant , 1990 .

[45]  Paul R. Milgrom,et al.  Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities , 1990 .

[46]  A. Greif.  Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders , 1989, The Journal of Economic History.

[47]  P. Bonacich.  Power and Centrality: A Family of Measures , 1987, American Journal of Sociology.

[48]  Paul Pecorino.  The effect of group size on public good provision in a repeated game setting , 1999 .