Ranking Friends

Stanford Graduate School of Business Research Paper No. 2127

15 Pages Posted: 20 Dec 2012

See all articles by Yossi Feinberg

Yossi Feinberg

Stanford Graduate School of Business

Willemien Kets

University of Oxford - Department of Economics

Date Written: December 19, 2012

Abstract

We investigate the scope for cooperation within a community engaged in repeated reciprocal interactions. Players seek the help of others and approach them sequentially according to some fixed order, that is, a ranking pro file. We study the ranking pro files that are most e ffective in sustaining cooperation in equilibrium, that is, pro files that support full cooperation in equilibrium under the largest set of parameters. These are the profi les that spread the costs of helping others equally among the members of the community. We show that, generically, these socially optimal ranking profi les correspond to Latin squares - profiles in which each player appears in a given position exactly once in other players' list. In addition, we study equilibria with bilateral enforcement in which only the victims punish non-cooperating deviators. We show that the Latin squares in which every two players rank each other at the same position can sustain cooperation for the widest range of parameters in this case.

Keywords: economic theory

Suggested Citation

Feinberg, Yossi and Kets, Willemien, Ranking Friends (December 19, 2012). Stanford Graduate School of Business Research Paper No. 2127, Available at SSRN: https://ssrn.com/abstract=2192186 or http://dx.doi.org/10.2139/ssrn.2192186

Yossi Feinberg (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Willemien Kets

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

HOME PAGE: http://wkets.org

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
26
Abstract Views
383
PlumX Metrics