Document Type
Article
Publication Date
8-19-2018
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.
Recommended Citation
Bigoni, M., Camera, G., & Casari, M. (2018). Partners or strangers? Cooperation, monetary trade, and the choice of scale of interation. ESI Working Paper 18-05. Retrieved from https://digitalcommons.chapman.edu/esi_working_papers/243
Comments
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