 The One who Gives Too Early, Gives Twice: Cooperation, Blood Feuds and Third-Party InstitutionsElias Khalil () No 24-12, Monash Economics Working Papers from Monash University, Department of Economics Abstract: Third-party institutions (judges, real-estate agents, referees, mediators, and arbiters) are designed to avoid mis-coordination among potential cooperators. They differ from first-party institutions (lobbyists) who act as rent-seekers in bargaining. They also differ from second-party institutions (auditors) who act as monitors in principal-agency problems. Third-party institutions are geared to minimize distorted belief formation, which arises from the uncertainty of how to judge the over-contribution of others: Is it the outcome of a positive income shock or is it expressive of real income being higher than estimated income? Given positively skewed income distribution and bounded rationality, such uncertainty leads to mis-judgments of the contribution of others as “unfair,” leading to the collapse of cooperation. Keywords: Conditional Cooperation; Unfairness; Super-Fairness; Big-Headedness (Pride); Distorted Belief Hypothesis; Positively Skewed Income Distribution; Bounded Rationality; Heuristics of Reciprocity; Arbitrators (third-party institutions) (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mos:moswps:2012-24 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Monash Economics Working Papers from Monash University, Department of Economics Department of Economics, Monash University, Victoria 3800, Australia. Contact information at EDIRC. |
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