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The social equilibrium of relational arrangements
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Ghosh, Parikshit and Ray, Debraj (2023) The social equilibrium of relational arrangements. Journal of Institutional and Theoretical Economics JITE, 179 (3-4). pp. 579-615. doi:10.1628/jite-2023-0044 ISSN 0932-4569.
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Official URL: http://doi.org/10.1628/jite-2023-0044
Abstract
The enforcement of relational contracts is especially challenging for anonymous environments in which new partnerships can be started after a transgression. Building on Ghosh and Ray (1996), we study bilateral partnership norms that exhibit gradually increasing cooperation, thereby deterring deviations. But such gradualism must be incentive-compatible for partners. We argue that incomplete information regarding partner patience solves this problem even though it further exacerbates the overall lack of information. Socially beneficial gradualism now becomes bilaterally desirable. We also study a version of our problem with one-sided moral hazard, and discuss analytical approaches to environments with richer gradations of incomplete information.
Item Type: | Journal Article | ||||||
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Divisions: | Faculty of Social Sciences > Economics | ||||||
Journal or Publication Title: | Journal of Institutional and Theoretical Economics JITE | ||||||
Publisher: | Mohr Siebeck GmbH & Co. KG | ||||||
ISSN: | 0932-4569 | ||||||
Official Date: | 13 December 2023 | ||||||
Dates: |
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Volume: | 179 | ||||||
Number: | 3-4 | ||||||
Page Range: | pp. 579-615 | ||||||
DOI: | 10.1628/jite-2023-0044 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Description: | Special Issue on Relational Contracts |
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Date of first compliant deposit: | 28 June 2023 | ||||||
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