The Use and Misuse of Coordinated Punishments
Communication facilitates cooperation by ensuring that deviators are collectively punished. We explore how players might misuse equilibrium messages to threaten one another, and we identify conditions under which communication improves cooperation despite such threats. In our model, a principal plays trust games with a sequence of short-run agents who communicate with each other. A shirking agent can demand pay by threatening to report that the principal deviated. We show how these threats can destroy cooperation. However, some cooperation is restored if players observe public signals of efforts or transfers, or if the principal has a bilateral relationship with each agent.
Daniel Barron, yingni guo
Barron, Daniel, and yingni guo. 2019. The Use and Misuse of Coordinated Punishments.