Money and the Scale of Cooperation

Quaderni - Working Paper DSE N° 1045

45 Pages Posted: 23 Dec 2015

See all articles by Maria Bigoni

Maria Bigoni

University of Bologna - Department of Economics; IZA Institute of Labor Economics

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Marco Casari

University of Bologna - Department of Economics

Date Written: December 22, 2015

Abstract

This study reveals the existence of a causal link between the availability of money and an expanded scale of interaction. We constructed an experiment where participants chose the group size, either a low-value partnership or a high-value group of strangers, and then faced an intertemporal cooperative task. Theoretically, a monetary system was inessential to achieve cooperation. Empirically, without a working monetary system, participants were reluctant to expand the scale of interaction; and when they did, they ended up destroying surplus compared to partnerships, because cooperation collapsed in large groups. This economic failure was reversed only when participants managed to concurrently develop a stable monetary system.

Keywords: Endogenous institutions, experiments, repeated games, strategic uncertainty

JEL Classification: C90, C70, D80

Suggested Citation

Bigoni, Maria and Camera, Gabriele and Casari, Marco, Money and the Scale of Cooperation (December 22, 2015). Quaderni - Working Paper DSE N° 1045. Available at SSRN: https://ssrn.com/abstract=2707094 or http://dx.doi.org/10.2139/ssrn.2707094

Maria Bigoni (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, Bologna 40126
Italy
+390512098134 (Phone)

HOME PAGE: http://https://www.unibo.it/sitoweb/maria.bigoni/en

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Gabriele Camera

Chapman University - Economic Science Institute ( email )

Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Marco Casari

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

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