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Trust in Cohesive Communities

Felipe Balmaceda () and Juan Esconar ()
Authors registered in the RePEc Author Service: Juan F. Escobar

No 295, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: This paper studies which social networks maximize trust and cooperation when agreements are implicitly enforced. We study a repeated trust game in which trading opportunities arise exogenously and the social network determines the information transmission technology. We show that cohesive communities, modeled as social networks of complete components, emerge as the optimal community design. Cohesive communities generate some degree of common knowledge of transpired play that allows players to coordinate their punishments and, as a result, yield relatively high equilibrium payoffs. Our results provide an economic rationale for the commonly argued optimality of cohesive social networks.

Date: 2013
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-evo, nep-exp, nep-gth, nep-mic, nep-net, nep-nps, nep-soc and nep-spo
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Citations: View citations in EconPapers (4)

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Journal Article: Trust in cohesive communities (2017) Downloads
Working Paper: Trust in Cohesive Communities (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:295

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