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Enforcing social norms: Trust-building and community enforcement

Author

Listed:
  • Deb, Joyee

    (Department of Economics, Yale University)

  • Gonzalez-Diaz, Julio

    (Department of Economics, University of Santiago de Compostela)

Abstract

We study impersonal exchange, and ask how agents can behave honestly in anonymous transactions without contracts. We analyze repeated anonymous random matching games, where agents observe only their own transactions. Little is known about cooperation in this setting beyond the prisoner's dilemma. We show that cooperation can be sustained quite generally, using community enforcement and ``trust-building.'' The latter refers to an initial phase in which one community builds trust by not deviating despite a short-run incentive to cheat; the other community reciprocates trust by not punishing deviations during this phase. Trust-building is followed by cooperative play, sustained through community enforcement.

Suggested Citation

  • Deb, Joyee & Gonzalez-Diaz, Julio, 2019. "Enforcing social norms: Trust-building and community enforcement," Theoretical Economics, Econometric Society, vol. 14(4), November.
    • Handle: RePEc:the:publsh:2404
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    References listed on IDEAS

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    1. Johannes Hörner & Wojciech Olszewski, 2006. "The Folk Theorem for Games with Private Almost-Perfect Monitoring," Econometrica, Econometric Society, vol. 74(6), pages 1499-1544, November.
    2. Pedro Bó, 2007. "Social norms, cooperation and inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(1), pages 89-105, January.
    3. Joyee Deb, 2008. "Cooperation and Community Responsibility: A Folk Theorem for Repeated Matching Games with Names," Working Papers 08-24, New York University, Leonard N. Stern School of Business, Department of Economics.
    4. , & ,, 2014. "Efficiency in repeated games with local interaction and uncertain local monitoring," Theoretical Economics, Econometric Society, vol. 9(1), January.
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    6. Takahashi, Satoru, 2010. "Community enforcement when players observe partners' past play," Journal of Economic Theory, Elsevier, vol. 145(1), pages 42-62, January.
    7. Ely, Jeffrey C. & Valimaki, Juuso, 2002. "A Robust Folk Theorem for the Prisoner's Dilemma," Journal of Economic Theory, Elsevier, vol. 102(1), pages 84-105, January.
    8. Nava, Francesco & Piccione, Michele, 2014. "Efficiency in repeated games with local interaction and uncertain local monitoring," LSE Research Online Documents on Economics 56218, London School of Economics and Political Science, LSE Library.
    9. Piccione, Michele, 2002. "The Repeated Prisoner's Dilemma with Imperfect Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 70-83, January.
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    Cited by:

    1. Tom Potoms & Tom Truyts, 2020. "Unhappy is the land without symbols - Group symbols in infinitely repeated public good games," Working Paper Series 1720, Department of Economics, University of Sussex Business School.
    2. Jindani, Sam, 2020. "Community enforcement using modal actions," Journal of Economic Theory, Elsevier, vol. 185(C).

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    More about this item

    Keywords

    Community enforcement; contagion; anonymous random matching; repeated games;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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