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Cooperation in Community Interaction Without Information Flows

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  • Parikshit Ghosh
  • Debraj Ray

Abstract

We study cooperative behavior in communities where the flow of infor- mation regarding past conduct is limited or missing. Players are initially randomly matched with no knowledge of each other's past actions; they endogenously decide whether or not to continue the repeated relationship. There is incomplete infor- mation regarding player types: a subset of the population is myopic, while the remainder have discount factors that permit cooperation, in principle. We define socialize'al equilibriumz in such communities. Such equilibria are characterized by an initial testing phase, followed by cooperation if the test is successful. It is pre- cisely the presence of myopic types that permit cooperation, by raising barriers to entry into new relationships. We examine the implications of increased patience, which takes two forms: an increase in the number of nonmyopic types, and an increase in the discount factor of nonmyopic types. These two notions turn out to have strikingly different implications for the degree of cooperation that can be sustained.

Suggested Citation

  • 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.
    • Handle: RePEc:fth:bosecd:64
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