American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Communication and Cooperation in Markets
American Economic Journal: Microeconomics
vol. 14,
no. 4, November 2022
(pp. 200–217)
Abstract
Many markets rely on traders truthfully communicating who has cheated in the past and ostracizing those traders from future trade. This paper investigates when truthful communication is incentive compatible. We find that if each side has a myopic incentive to deviate, then communication incentives are satisfied only when the volume of trade is low. By contrast, if only one side has a myopic incentive to deviate, then communication incentives do not constrain the volume of supportable trade. Accordingly, there are strong gains from structuring trade so that one side either moves first or has its cooperation guaranteed by external enforcement.Citation
Ali, S. Nageeb, and David A. Miller. 2022. "Communication and Cooperation in Markets." American Economic Journal: Microeconomics, 14 (4): 200–217. DOI: 10.1257/mic.20200296Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
There are no comments for this article.
Login to Comment