Jan 20, 2016 Filed in: Working papers
With S. Nageeb Ali and David Yilin Yang
Abstract: In a multilateral enforcement regime, a player who cheats on one partner is punished by many partners. But if partners can renegotiate in private, they can subvert the power of the multilateral punishment. We introduce a new notion of "bilateral renegotiation proofness" that applies to multilateral games with private monitoring. For symmetric networked environments, we characterize an optimal bilateral renegotiation proof equilibrium. While players’ ability to renegotiate bilaterally is indeed socially costly, it is perhaps not as costly as one might expect. In densely connected communities, the proportional cost imposed by bilateral renegotiation declines as the number of participants grows, and vanishes in the limit.
Working paper 1/10/2016
(New version coming in May 2016)
Feb 22, 2016 Filed in: Publications
With S. Nageeb Ali
Accepted for publication in The American Economic Review
Abstract: Many communities rely upon ostracism to enforce cooperation: if an individual shirks in one relationship, her innocent neighbors share information about her guilt in order to shun her, while continuing to cooperate among themselves. However, a strategic victim may herself prefer to shirk, rather than report others' deviations truthfully. If guilty players are to be permanently ostracized, then such deviations are so tempting that cooperation in any relationship is bounded by what the partners could obtain through bilateral enforcement. Ostracism can improve upon bilateral enforcement if tempered by forgiveness, through which guilty players are eventually readmitted to cooperative society.
Working paper version 2/8/2016
Apr 21, 2016 Filed in: Working papers
With Heidi Gjertsen, Theodore Groves, Eduard Niesten, Dale Squires, and Joel Watson
Abstract: We examine the structure and performance of conservation agreements, which are used across the world to protect natural resources. Key elements of these agreements are: (1) they are ongoing arrangements between a local community and an outside party, typically a non-governmental organization (NGO); (2) they feature payments in exchange for conservation services; (3) the prospects for success depend on the NGO engaging in costly monitoring to detect whether the community is foregoing short-term gains to protect the resource; (4) lacking a strong external enforcement system, they rely on self-enforcement; and (5) the parties have the opportunity to renegotiate at any time. We provide a novel model that contains these ingredients and we apply the model to assess the workings of real conservation agreements, using three case studies as representative examples. We characterize equilibrium play (including how punishments and rewards are structured) and we show how the parties' relative bargaining powers affect their ability to sustain cooperation over time. The model captures important features of real conservation agreements and identifies some of the features required for successful agreements.
Working paper 4/21/2016