Cooperation Among Strangers with Limited Information About Reputation

23 Pages Posted: 13 Mar 2005

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)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2003

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 full backward induction find that the necessary information is very large and recursive in nature, implausibly so outside of circumstances where there is a formal institution to process it. Models that relax backward induction find that the information demands may be quite modest. The experiment we present indicates that subjects condition their cooperation on information about their partners' immediate past action, while additional, recursive information about the partners' previous partners' reputation triggers and additional conditional response. Taken together, our results suggest that reputation is a more robust enforcement mechanism for cooperation than standard models suggest; informal stictures that punish cheaters and those who fail to punish cheaters is sufficient to generate substantial cooperation even when the benefits from cooperation are relatively modest.

Suggested Citation

Bolton, Gary Eugene and Katok, Elena and Ockenfels, Axel, Cooperation Among Strangers with Limited Information About Reputation (February 2003). Available at SSRN: https://ssrn.com/abstract=673408 or http://dx.doi.org/10.2139/ssrn.673408

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
79
Abstract Views
1,112
rank
332,188
PlumX Metrics