We show that monetary exchange facilitates the transition from small to large-scale economic interactions. In an experiment, subjects chose to play an “intertemporal cooperation game” either in partnerships or in groups of strangers where payoffs could be higher. Theoretically, a norm of mutual support is sufficient to maximize efficiency through large-scale cooperation. Empirically, absent a monetary system, participants were reluctant to interact on a large scale; and when they did, efficiency plummeted compared to partnerships because cooperation collapsed. This failure was reversed only when a stable monetary system endogenously emerged: the institution of money mitigated strategic uncertainty problems.
Partners or Strangers? Cooperation, monetary trade, and the choice of scale of interaction / Bigoni Maria; Camera Gabriele; Casari Marco. - In: AMERICAN ECONOMIC JOURNAL: MICROECONOMICS. - ISSN 1945-7669. - STAMPA. - 11:2(2019), pp. 195-227. [10.1257/mic.20170280]
Partners or Strangers? Cooperation, monetary trade, and the choice of scale of interaction
Bigoni Maria;Camera Gabriele;Casari Marco
2019
Abstract
We show that monetary exchange facilitates the transition from small to large-scale economic interactions. In an experiment, subjects chose to play an “intertemporal cooperation game” either in partnerships or in groups of strangers where payoffs could be higher. Theoretically, a norm of mutual support is sufficient to maximize efficiency through large-scale cooperation. Empirically, absent a monetary system, participants were reluctant to interact on a large scale; and when they did, efficiency plummeted compared to partnerships because cooperation collapsed. This failure was reversed only when a stable monetary system endogenously emerged: the institution of money mitigated strategic uncertainty problems.File | Dimensione | Formato | |
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