Performance and Turnover in a Stochastic Partnership

David McAdams ()

American Economic Journal: Microeconomics, 2011, vol. 3, issue 4, 107-42

Abstract: Suppose that players in a stochastic partnership have the option to quit and rematch anonymously. If stage-game payoffs are subject to a persistent initial shock, the (unique) social welfare-maximizing equilibrium induces a "dating" process in which all partners enjoy the full potential equilibrium gains from each match. By contrast, maximizing social welfare in non-stochastic repeated games with rematching requires that players burn money or otherwise fail to realize all potential equilibrium gains. Comparative statics on welfare and turnover are also provided, consistent with documented patterns of "survivorship bias" and "honeymoon." (JEL C72, C73, C78)

JEL-codes: C72 C73 C78 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mic.3.4.107
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Performance and Turnover in a Stochastic Partnership (2010)
Working Paper: Performance and Turnover in a Stochastic Partnership (2010)
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