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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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Sustaining Cooperation Through Strategic Self-Interested Actions

Francesco Lancia / Alessia Russo
Published Online: 2018-10-09 | DOI: https://doi.org/10.1515/bejte-2017-0157


This paper studies how organizations seek to promote cooperation between their members when individual contributions to an organization’s output are imperfectly observable. It considers an overlapping-generations game in which members with conflicting interests expend effort in pursuing activities outside the organization, in addition to the effort they devote to increasing the organization’s output. We show that cooperation is easier to enforce when organizations link rewards and punishments to effort in outside activities. In the best public perfect equilibrium, effort in outside activities is distorted in order to signal a member’s willingness to cooperate inside the organization.

Keywords: imperfect monitoring; intergenerational cooperation; limited enforcement; organizations

JEL Classification: C73; D62; M54


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About the article

Published Online: 2018-10-09

Citation Information: The B.E. Journal of Theoretical Economics, Volume 19, Issue 2, 20170157, ISSN (Online) 1935-1704, DOI: https://doi.org/10.1515/bejte-2017-0157.

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