Sep 11, 2011 Filed in: Working papers
With Heidi Gjertsen, Theodore Groves, Eduard Niesten, Dale Squires, and Joel Watson
Abstract: We model conservation agreements using contractual equilibrium, a concept introduced by Miller and Watson (2010) to model dynamic relationships with renegotiation. The setting takes the form of a repeated principal-agent problem, where the principal must pay to observe a noisy signal of the agent's effort. Lacking a strong external enforcement system, the parties rely on self-enforcement for their relational contract. 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. We argue that the model captures important features of real conservation agreements and reveals the ingredients required for successful agreements.
Working paper 9/23/2010 (stay tuned for an updated version)
Jul 29, 2011 Filed in: News
Nageeb Ali and I have been awarded a three-year grant from the National Science Foundation Economics Program, entitled “Enforcing Cooperation in Networked Societies.” Stay tuned for our first working paper soon (Update: now available), and lots of great projects to follow after that.
Abstract excerpt: The foundation of economic activity and growth is in the ability of individuals to trust and trade with each other over time. Throughout human history, much of economic activity occurs in realms where formal legal institutions are unwilling or unsuited to enforce cooperative behavior. A growing literature on informal enforcement suggests that the networked pattern of social relationships plays a key role in supporting cooperation: as information about past behavior diffuses through the network, an individual who deviates in a partnership is punished not only by her partner but also by those who come to learn about it. Our research program studies how communities enforce cooperation through their social networks.