Trust in Cohesive Communities

Felipe Balmaceda () and Juan Escobar

No 40, Working Papers from Facultad de Economía y Empresa, Universidad Diego Portales

Abstract: This paper investigates the social structures that maximize trust and cooperation when agreements are implicitly enforced. We study a repeated trust game in which 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 payo s. Our results provide an economic rationale for the commonly argued optimality of cohesive social networks.

Date: 2013-06
New Economics Papers: this item is included in nep-cdm, nep-evo, nep-gth, nep-mic and nep-net
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Trust in cohesive communities (2017)
Working Paper: Trust in Cohesive Communities (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ptl:wpaper:40

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