On Symbols and Cooperation

Abstract

How are group symbols (e.g., a flag, a Muslim veil, a clothing style) helpful in sustaining cooperation and social norms? We study the role of symbols in an infinitely repeated public goods game with random matching, endogenous partnership termination, limited information ‡flows and endogenous symbol choice. We characterize an efficient segregating equilibrium, in which players only cooperate with others bearing the same symbol. In this equilibrium, players bearing a scarcer symbol face a longer expected search time to find a cooperative partner upon partnership termination, and this sacrifice of outside options allows them to sustain higher levels of cooperation. We compare this equilibrium to other equilibria in terms of renegotiation proofness, and we discuss the relation this has to the evolution of intolerance.

JEL Classification: C73, D83