Sep 11, 2011 Filed in:
Working papersWith Heidi Gjertsen, Theodore Groves, Eduard Niesten, Dale Squires, and Joel Watson
Abstract: We model conservation agreements using contractual equilibrium, a concept introduced by Miller and Watson (2010) to model dynamic relationships with renegotiation. The setting takes the form of a repeated principal-agent problem, where the principal must pay to observe a noisy signal of the agent's effort. Lacking a strong external enforcement system, the parties rely on self-enforcement for their relational contract. We characterize equilibrium play (including how punishments and rewards are structured) and we show how the parties' relative bargaining powers affect their ability to sustain cooperation over time. We argue that the model captures important features of real conservation agreements and reveals the ingredients required for successful agreements.
Working paper 9/23/2010 (stay tuned for an updated version in fall 2011)
PermalinkTags: Repeated games, Community enforcement, Conservation Agreements, Monitoring, Bargaining, Negotiation, Renegotiation, Principal-Agent, Cooperation, Forest Protection, Cambodia, Coral Reefs, Fiji, Sea Turtles, Solomon Islands, Grey Whales, Baja California
Jul 29, 2011 Filed in:
NewsNageeb Ali and I have been awarded a three-year grant from the National Science Foundation Economics Program, entitled “Enforcing Cooperation in Networked Societies.” Stay tuned for our first working paper soon, and lots of great projects to follow after that.
Abstract excerpt: The foundation of economic activity and growth is in the ability of individuals to trust and trade with each other over time. Throughout human history, much of economic activity occurs in realms where formal legal institutions are unwilling or unsuited to enforce cooperative behavior. A growing literature on informal enforcement suggests that the networked pattern of social relationships plays a key role in supporting cooperation: as information about past behavior diffuses through the network, an individual who deviates in a partnership is punished not only by her partner but also by those who come to learn about it. Our research program studies how communities enforce cooperation through their social networks.PermalinkTags: Social Networks, Cooperation, Community enforcement
Jan 16, 2012 Filed in:
Working papersWith Kareen Rozen
Abstract: We study optimal contracting in teams with peer monitoring and moral hazard, featuring stylized aspects of production environments with complex tasks. Agents have many opportunities to shirk, task-level monitoring is needed to provide useful incentives, and because it is difficult to write individual performance into formal contracts, incentives are provided informally, using wasteful sanctions like guilt and shame, or slowed promotion.
These features give rise to optimal contracts with “empty promises” and endogenous supervision structures. Agents optimally make more promises than they intend to keep, leading to the concentration of supervisory responsibility in the hands of one or two agents.
Working paper 1/16/2012
PermalinkTags: Contracts, Moral hazard, Mechanism design, Peer monitoring, Partnership, Teams, Principal-Agent, Bounded memory, Cooperation
Feb 01, 2010 Filed in:
Work in progressWith Nageeb Ali
Abstract: We endogenize social network formation and collective enforcement using a model in which players interact bilaterally and repeatedly along costly links. Players observe only their own partners' actions, so collective punishments that support cooperation must spread endogenously through the network, as a contagion. Our model features asynchronous interaction, variable stakes in each relationship, and transferable utilities. With these properties, for any network there exists a contagion equilibrium in which incentive constraints bind along the equilibrium path. Among symmetric networks, the optimal network topology in a large society features many identical, independent cliques. We conjecture that such a network is also Pareto optimal among all (symmetric and asymmetric) networks. Our results formalize the notion that when collective enforcement is decentralized, the level of social cooperation, or "social capital," is maximized in tight-knit, highly clustered groups.
Working paper coming soon
PermalinkTags: Repeated games, Social Networks, Community enforcement, Network Formation, Cooperation, Contagion, Small Worlds, Cliques
Oct 13, 2011 Filed in:
Working papersWith Joel Watson
Abstract: This paper proposes a new approach to the problem of equilibrium selection in repeated games with transfers, by supposing that in each period the players bargain over how to play. Although the bargaining phase is cheap talk (which follows a generalized alternating-offer protocol), sharp predictions arise from three axioms. Two axioms allow the players to meaningfully discuss whether to deviate from their plan; the third embodies a "theory of disagreement”—that play under disagreement should not vary with the manner in which bargaining broke down. Equilibria satisfying these axioms exist for all discount factors and are simple to construct, and all equilibria attain the same joint value. Optimal play under agreement generally requires suboptimal play under disagreement. Whether patient players attain efficiency depends on both the stage game and the bargaining power that they derive from the details of the bargaining protocol. The theory extends naturally to games with imperfect public monitoring and heterogeneous discount factors, and yields new insights into classic relational contracting questions.
Working paper 10/13/2011
PermalinkTags: Repeated games, Bargaining, Negotiation, Renegotiation, Relational contracts, Principal-Agent, Cooperation
May 06, 2006 Filed in:
PublicationsWith Sameer Tilak and Tony Fountain
Published in the Proceedings of the Workshop on Stochasticity in Distributed Systems (StoDiS'05), San Jose, CA, December 19, 2005
Abstract: When two sponsoring organizations, working towards separate goals, employ wireless sensor networks for a finite period of time, it can be efficiency-enhancing for the sponsors to program their sensors to cooperate. But if each sensor privately knows whether it can provide a favor in any particular period, and the sponsors cannot contract on ex post payments, then no favors are performed in any Nash equilibrium. Allowing the sponsors to contract on ex post payments, we construct equilibria based on the exchange of "tokens" that yield significant cooperation and increase expected sponsor payoffs. Increasing the sponsors' liability is beneficial because it enables them to use more tokens.
Working paper 5/22/2006 (newer and better than the StoDiS version)
PermalinkTags: Computer science, Private information, Repeated games, Cooperation, Sensor networks
