Banerjee, Priyodorshi: Community Enforcement with Endogenous Information
World Conference Econometric Society, 2000, Seattle

Priyodorshi Banerjee, Boston University
Community Enforcement with Endogenous Information
Session: C-7-3  Sunday 13 August 2000  by Banerjee, Priyodorshi
We consider cooperative arrangements in a fixed community where agents may change partners over time and where public communication is possible. Public monitoring and exogenous information flows are absent: any player's action in any period is observed only by the agent himself and his partner in that period. We show that cooperation can be sustained as a sequential equilibrium in such an environment if agents are required to make public and simultaneous announcements about their activities even if such announcements are non-verifiable. This result also holds in the presence of small costs of information transmission; however, there may be inefficiencies in such an environment. In the presence of information processing costs, cooperation may be difficult to sustain; however, if there are some exogenous probabilities of a change in the environment, cooperation can be sustained even in the presence of (private and unobservable) costs of gathering information.
Submitted paper full-text in .pdf


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