Sustaining Cooperation Through Strategic Self-Interested Actions

Francesco Lancia and Alessia Russo

The B.E. Journal of Theoretical Economics, 2019, vol. 19, issue 2, 11

Abstract: This paper studies how organizations seek to promote cooperation between their members when individual contributions to an organization’s output are imperfectly observable. It considers an overlapping-generations game in which members with conflicting interests expend effort in pursuing activities outside the organization, in addition to the effort they devote to increasing the organization’s output. We show that cooperation is easier to enforce when organizations link rewards and punishments to effort in outside activities. In the best public perfect equilibrium, effort in outside activities is distorted in order to signal a member’s willingness to cooperate inside the organization.

Keywords: imperfect monitoring; intergenerational cooperation; limited enforcement; organizations (search for similar items in EconPapers)
JEL-codes: C73 D62 M54 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/bejte-2017-0157

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