Noise-Tolerant Community Enforcement and the Strength of Small Stakes

A-Tier
Journal: American Economic Review: Insights
Year: 2024
Volume: 6
Issue: 4
Pages: 509-25

Authors (2)

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We study community enforcement in a large population with noisy monitoring. We focus on equilibria in the prisoner's dilemma that are coordination proof, meaning that matched partners never play a Pareto-dominated Nash equilibrium in the one-shot game induced by the equilibrium continuation payoffs at their current histories. We show that a noise-tolerant version of contagion strategies is optimal among all coordination-proof equilibria. Welfare under tolerant contagion strategies decreases in the noise level and the gain from defection faster than welfare in a fixed partnership does. Thus, community enforcement has a comparative advantage in supporting "low-stakes" relationships.

Technical Details

RePEc Handle
repec:aea:aerins:v:6:y:2024:i:4:p:509-25
Journal Field
General
Author Count
2
Added to Database
2026-01-29