Investing to cooperate: theory and experiment

Benoit, J-P, Galbiati, R and Henry, E (2017) Investing to cooperate: theory and experiment. Journal of Economic Behavior & Organization, 144 (Dec.). pp. 1-17. ISSN 0167-2681 OPEN ACCESS

Abstract

We study theoretically and in a lab-experiment investment decisions in environments where property rights are absent. In our setting a player chooses an investment level before interacting repeatedly with a given set of agents. The investment stochastically affects the payoffs of the game in every subsequent period. We show that more volatile returns make investment more difficult in the absence of legal protection, and might force the investor to invest more to guarantee cooperation. Experimental results are broadly consistent with the theoretical findings.

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Item Type: Article
Subject Areas: Economics
Additional Information: © 2017 Elsevier
Subjects: E > Experiments
I > Investment theory
Date Deposited: 20 Sep 2017 11:11
Last Modified: 12 Nov 2019 05:43
URI: http://lbsresearch.london.edu/id/eprint/890
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