The Scope of Cooperation: Values and Incentives

47 Pages Posted: 5 Jun 2008

See all articles by Guido Tabellini

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Abstract

What explains the range of situations in which individuals cooperate? This paper studies a theoretical model where individuals respond to incentives but are also influenced by norms of good conduct inherited from earlier generations. Parents rationally choose what values to transmit to their offspring, and this choice is influenced by the quality of external enforcement and the pattern of likely future transactions. The equilibrium displays strategic complementarities between values and current behaviour, which reinforce the effects of changes in the external environment. Values evolve gradually over time, and if the quality of external enforcement is chosen under majority rule, there is hysteresis: adverse initial conditions may lead to a unique equilibrium path where external enforcement remains weak and individual values discourage cooperation.

Keywords: cooperation, cultural transmission, culture, institutions

JEL Classification: A10, A14

Suggested Citation

Tabellini, Guido, The Scope of Cooperation: Values and Incentives. CEPR Discussion Paper No. DP6534, Available at SSRN: https://ssrn.com/abstract=1140061

Guido Tabellini (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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