The Coordination Value of Monetary Exchange: Experimental Evidence
Economics Science Institute, Chapman University
University of Bologna - Department of Economics
June 7, 2011
Quaderni DSE Working Paper No. 754
Under what conditions can cooperation be sustained in a network of strangers? Here we study the role of institutions and uncover a new behavioral foundation for the use of monetary systems.
In an experiment, anonymous subjects could cooperate or defect in bilateral random encounters. This sequence of encounters was indefinite; hence multiple equilibria were possible, including full intertemporal cooperation supported by a social norm based on community punishment of defectors. We report that such social norm did not emerge. Instead, the availability of intrinsically worthless tokens favored the coordination on intertemporal cooperation in ways that networks of strangers were unable to achieve through social norms.
Number of Pages in PDF File: 51
Keywords: money, cooperation, information, trust, folk theorem, repeated games
JEL Classification: C70, C90, D80working papers series
Date posted: June 11, 2011
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