Competition and Cooperation: The Role of Reputation and Information in Networked Exchange (w/ Alessandra Cassar)

It is well-known that bilateral exchange under implicit contracts is often efficient and cooperative, even in environments where the equilibrium path favors no exchange at all. A principal and an agent manage to trade, often equally sharing the gains from exchange. What is less well-known is the degree to which the network structure principals and their agents find themselves in affects the degree of cooperativeness in these exchange relationships. And yet many environments have more structure to them than is represented by bilateral exchange: a principal may invest simlutaneously in multiple agents, and an agent may represent the interests of more than one principal. In such cases, all of the connected parties are actors in the transaction and the structure of the network they find themselves in may have consequences for their choice behavior in the (thin) market in which they operate. With strategic behavior often embedded in social networks, there is a need to study that behavior as it occurs as part of a complex system in which the parties in the exchange are linked to each other. This paper examines the implications in more realistic small trading networks where principals and their agents interact repeatedly over time. Our question is whether or not repeated trade is enough to generate efficiencies from exchange in networked exchange environments or if there some special gain from knowing the reputation of the others in the market.

Status: sessions completed, data analyzed, draft being written

Relativized Trust and Reciprocity: Cooperation within Networks (w/ Alessandra Cassar)

Our experimental study of trust and reciprocity explores how network architecture and information exchange within a network influence the level of cooperative behavior in personal exchange environments. We study triads by adding either a second trustee or a second truster to the standard investment game. Under the triadic network structure, in the first case, competition exists on the buyers’ side of the market (competition downstream) and in the other case, competition exists on the sellers’ side of the market (competition upstream). Our question of interest is when there are gains to be had from exchange will competition downstream or competition upstream help promote trade beyond that achieved under dyadic arrangements.

Status: One-shot matching protocol sessions completed