1 Facolt di Economia Universit degli Studi di Parma Cooperation
and Competition Among Firms Ch. 3 Provisional Version (1) 2013-14
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Factors (strategies) facilitating cooperation between
individuals and firms Factors (strategies) facilitating cooperation
between individuals and firms 2
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Factors and mechanisms of type: endogenous exogenous Factors
and mechanisms of type: endogenous exogenous 3
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Endogenous Strategies The initial structure of payoffs is
unaffected. The likelihood of cooperation depends on variables
that: qualify subjectively the participants; qualify subjectively
the participants; define the attributes of the group; define the
attributes of the group; reflect the characteristics or the content
of collective action. reflect the characteristics or the content of
collective action. 4
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Exogenous Strategies Preferences and characteristics of the
participants are taken as given. The likelihood of cooperation
depends on: changes in the structure of payoffs; changes in the
structure of payoffs; sanctions mechanisms and incentives entered;
sanctions mechanisms and incentives entered; involvement of agents
outside the group involvement of agents outside the group
differentiation of agents in decision-making roles differentiation
of agents in decision-making roles 5
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Endogenous Strategies 6
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The shadow of the future One-shot Prisoners dilemma One-shot
Prisoners dilemma Iterated prisoners dilemma (IPD) Iterated
prisoners dilemma (IPD) 7
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8 Prisoners dilemma C D C D 0,0 1, 1-1, 2 2, -1
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9 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2,
-1
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10 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2, -1
D,D=0 C,C=1
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11 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2, -1
D,D=0+0 C,C=1+1
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12 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2, -1
D,D=0+0+0+0 C,C=1+1+1+1
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13 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2, -1
D,D=0+0+0+0+0 C,C=1+1+1+1+1
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14 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2, -1
D,D=0+0+0+0+0+0 C,C=1+1+1+1+1+1
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15 Prisoners dilemma C D C D Dana Andrea 0,0 1, 1-1, 2 2, -1
D,D=0+0+0+0+0+0+0. C,C=1+1+1+1+1+1+1.
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The shadow of the future One-shot Prisoners dilemma One-shot
Prisoners dilemma Iterated prisoners dilemma (IPD) Iterated
prisoners dilemma (IPD) Indefinite Iteration: Indefinite Iteration:
The value of cooperation at a given stage in an IPD clearly depends
on the odds of meeting one's opponent in later rounds. The value of
cooperation at a given stage in an IPD clearly depends on the odds
of meeting one's opponent in later rounds. As p (likelihood to meet
ones opponent in the following rounds) approaches 0, the IPD
becomes a one-shot PD, and the value of defection increases. As p
(likelihood to meet ones opponent in the following rounds)
approaches 0, the IPD becomes a one-shot PD, and the value of
defection increases. As p approaches 1 the IPD becomes an infinite
IPD, and the value of defection decreases As p approaches 1 the IPD
becomes an infinite IPD, and the value of defection decreases
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1.1 Self-enforcing agreements Incomplete exchange scheme
involving two or more imperfectly informed agents. The parties
endorse mutual commitments to the continuation of the exchange even
if they do not adopt legally binding contracts. The advantage of
exchange is evaluated with regard to the difference between the
accumulated payoffs of joint cooperation and the payoffs of
defection. Incomplete exchange scheme involving two or more
imperfectly informed agents. The parties endorse mutual commitments
to the continuation of the exchange even if they do not adopt
legally binding contracts. The advantage of exchange is evaluated
with regard to the difference between the accumulated payoffs of
joint cooperation and the payoffs of defection. (example:
Buyer-supplier relationships) (example: Buyer-supplier
relationships) 19
Slide 20
Self-enforcing agreements can not be applied to transactions
involving relationships that develop in a short term horizon.
Self-enforcing agreements can not be applied to transactions
involving relationships that develop in a short term horizon. But
they are an appropriate solution when the time horizon of the
report is expected long-term (indefinite iterated game). But they
are an appropriate solution when the time horizon of the report is
expected long-term (indefinite iterated game). The sanction linked
to failure to cooperate is not imposed by a third party but
consists of the loss of profits of the entire exchange
relationship. The sanction linked to failure to cooperate is not
imposed by a third party but consists of the loss of profits of the
entire exchange relationship. Sd=Defection payoff Sd=Defection
payoff Ss=Cooperation payoff Ss=Cooperation payoff P=Accumulated
payoff P=Accumulated payoff 20