Building routines: Learning, cooperation, and the dynamics of incomplete relational contracts

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Abstract

This paper studies how agents with conflicting interests learn to cooperate when the details of cooperation are not common knowledge. It considers a repeated game in which one player has incomplete information about when and how her partner can provide benefits. Initially, monitoring is imperfect and cooperation requires inefficient punishment. As the players' common history grows, the uninformed player can learn to monitor her partner's actions, which allows players to establish more efficient cooperative routines. Because revealing information is costly, it may be optimal not to reveal all the existing information, and effcient equilibria can be path-dependent.

Original languageEnglish (US)
Pages (from-to)448-465
Number of pages18
JournalAmerican Economic Review
Volume100
Issue number1
DOIs
StatePublished - Mar 2010

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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