The Social Equilibrium of Relational Arrangements

Parikshit Ghosh and Debraj Ray

Journal of Institutional and Theoretical Economics (JITE), 2023, vol. 179, issue 3-4, 579-615

Abstract: The enforcement of relational contracts is especially challenging for anonymous environments in which new partnerships can be started after a transgression. Building on Ghosh and Ray (1996), we study bilateral partnership norms that exhibit gradually increasing cooperation, thereby deterring deviations. But such gradualism must be incentive-compatible for partners. We argue that incomplete information regarding partner patience solves this problem even though it further exacerbates the overall lack of information. Socially beneficial gradualism now becomes bilaterally desirable. We also study a version of our problem with one-sided moral hazard, and discuss analytical approaches to environments with richer gradations of incomplete information.

Keywords: relational contracts; social norms; gradualism; trust-building; dynamic games; relationalcontracts; socialnorms; dynamicgames (search for similar items in EconPapers)
JEL-codes: C73 D85 D86 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.mohrsiebeck.com/en/article/the-social- ... 101628jite-2023-0044
Fulltext access is included for subscribers to the printed version.

Related works:
Working Paper: The Social Equilibrium of Relational Arrangements (2023)
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:mhr:jinste:urn:doi:10.1628/jite-2023-0044

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

DOI: 10.1628/jite-2023-0044

Access Statistics for this article

Journal of Institutional and Theoretical Economics (JITE) is currently edited by Gerd Mühlheußer and Bayer, Ralph-C

More articles in Journal of Institutional and Theoretical Economics (JITE) from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().