蝌蚪网 Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Noise-Tolerant Community Enforcement and the Strength of Small Stakes
蝌蚪网 Review: Insights
vol. 6,
no. 4, December 2024
(pp. 509–25)
Abstract
We study community enforcement in a large population with noisy monitoring. We focus on equilibria in the prisoner's dilemma that are coordination proof, meaning that matched partners never play a Pareto-dominated Nash equilibrium in the one-shot game induced by the equilibrium continuation payoffs at their current histories. We show that a noise-tolerant version of contagion strategies is optimal among all coordination-proof equilibria. Welfare under tolerant contagion strategies decreases in the noise level and the gain from defection faster than welfare in a fixed partnership does. Thus, community enforcement has a comparative advantage in supporting "low-stakes" relationships.Citation
Fudenberg, Drew, and Alexander Wolitzky. 2024. "Noise-Tolerant Community Enforcement and the Strength of Small Stakes." 蝌蚪网 Review: Insights 6 (4): 509–25. DOI: 10.1257/aeri.20230617Additional Materials
JEL Classification
- C72 Noncooperative Games
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- C78 Bargaining Theory; Matching Theory
- Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification