A Theory of Community Formation and Social Hierarchy

Susan Athey, Emilio Calvano and Saumitra Jha

Research Papers from Stanford University, Graduate School of Business

Abstract: We analyze the classic problem of sustaining trust when cheating and leaving trading partners is easy, and outside enforcement is difficult. We construct equilibria where individuals are loyal to smaller groups--communities--that allow repeated interaction. Hierarchies provide incentives for loyalty and allow individuals to trust agents to extent that the agents are actually trustworthy. We contrast these with other plausible institutions for engendering loyalty that require inefficient withholding of trust to support group norms, and are not robust to coalitional deviations. In communities whose members randomly match, we show that social mobility within hierarchies falls as temptations to cheat rise. In communities where individuals can concentrate their trading with pre-selected members, hierarchies where senior members are favored for trade sustain trust even in the presence of proximate nonhierarchical communities. We link these results to the emergence of trust in new market environments and early human societies.

Date: 2016-08
New Economics Papers: this item is included in nep-cdm, nep-evo, nep-exp, nep-hpe, nep-mic and nep-soc
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/423226
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/423226 [301 Moved Permanently]--> https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/423226)

Related works:
Working Paper: A Theory of Community Formation and Social Hierarchy (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3467

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().