Giancarlo Spagnolo: Department of Economics, Postal: Churchill College, Cambridge, and Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden.
Abstract: The paper analyses how cooperation in a repeated social game may help to sustain cooperation in a "linked" repeated production game. We show that this may happen a)because of available "social capital", defined as the slack of punishment power present in the social repeated game, b) because, when agents' utility function is strictly concave in the outcome of the two games, a simultaneous punishment in the linked games turns out to be a stronger threat than the sum of the independent punishments in the two component games, and c) because the linkage between two repeated games may generate transfers of "trust".
31 pages, October 1995
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