Journal Article

Cooperation with Network Monitoring

Alexander Wolitzky

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 80, issue 1, pages 395-427
Published in print January 2013 | ISSN: 0034-6527
Published online March 2012 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rds016
Cooperation with Network Monitoring

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  • Information, Knowledge, and Uncertainy
  • Publicly Provided Goods
  • Game Theory and Bargaining Theory

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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.

Keywords: Cooperation; Public goods; Group size and structure; Repeated games; Private monitoring; Networks; Centrality; C70; C73; D85; H41

Journal Article.  17335 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Publicly Provided Goods ; Game Theory and Bargaining Theory

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