Cooperation Among Strangers with Limited Information About Reputation

Posted: 22 Jul 2007

See all articles by Gary E. Bolton

Gary E. Bolton

Pennsylvania State University - Department of Supply Chain & Information Systems

Elena Katok

University of Texas at Dallas

Axel Ockenfels

University of Cologne - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

The amount of institutional intervention necessary to secure efficiency-enhancing cooperation in markets and organizations, in circumstances where interactions take place among essentially strangers, depends critically on the amount of information informal reputation mechanisms need transmit. Models based on subgame perfection find that the information necessary to support cooperation is recursive in nature and thus information generating and processing requirements are quite demanding. Models that do not rely on subgame perfection, on the other hand, suggest that the information demands may be quite modest. The experiment we present indicates that even without any reputation information there is a non-negligible amount of cooperation that is, however, quite sensitive to the cooperation costs. For high costs, providing information about a partner's immediate past action increases cooperation. Recursive information about the partners' previous partners' reputation further promotes cooperation, regardless of the cooperation costs.

Keywords: Experimental economics, Reputation, Cooperation

JEL Classification: C7, C91, L14

Suggested Citation

Bolton, Gary Eugene and Katok, Elena and Ockenfels, Axel, Cooperation Among Strangers with Limited Information About Reputation. Journal of Public Economics, Vol. 89, No. 8, 2005. Available at SSRN: https://ssrn.com/abstract=1002109

Gary Eugene Bolton

Pennsylvania State University - Department of Supply Chain & Information Systems ( email )

Dept. of Supply Chain & Information Systems
University Park, PA 16802-3306
United States
814-865-0611 (Phone)
814-863-2381 (Fax)

Elena Katok (Contact Author)

University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Dr.
Richardson, TX 75080
United States

HOME PAGE: http://www.utdallas.edu/~ekatok/

Axel Ockenfels

University of Cologne - Department of Economics ( email )

Albertus Magnus Platz
Cologne 50923
Germany

HOME PAGE: http://ockenfels.uni-koeln.de/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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