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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.


Working Paper 18-05

This working paper was later published as:

Bigoni, M., Camera, G., & Casari, M. (2019). Partners or strangers? Cooperation, monetary trade, and the choice of scale of interaction. American Economic Journal - Microeconomics, 11(2), 195-227. doi: 10.1257/mic.20170280



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