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Research Details

The Use and Abuse of Coordinated Punishments

Abstract

A principal plays trust games with a sequence of short-lived agents who must communicate deviations to sustain cooperation. We argue that agents can abuse communication by shirking and threatening to report a deviation unless the principal nevertheless pays them. To make this threat credible, we allow agents to probabilistically commit to messages as a function of the principal's action. In equilibrium, this threat increases the agents' share of surplus but decreases total surplus; no cooperation can be sustained if agents can always commit. We show how evidence of strong bilateral principal-agent relationships mitigate this problem and partially restore cooperation.

Type

Working Paper

Author(s)

Daniel Barron, yingni guo

Date Published

2018

Citations

Barron, Daniel, and yingni guo. 2018. The Use and Abuse of Coordinated Punishments.

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