Bray Theory Workshop

Abstract: Cooperation has been associated with "closely knit" organizations, where members know each other well and stay in the organization for a long time. In contrast, we show that cooperation is also possible in a "loosely knit" organization, where members do not know each other well and they enter and exit frequently. In particular, we present a case study of a labor union of a quite unusual form, that has the features of the loosely knit organization. The structure of the union closely resembles the OLG repeated game under private monitoring. We collected original data set to examine how the network of cooperation has been formed among union members. Finding the mechanism (equilibrium) to sustain cooperation is challenging because members have limited information about who helped whom. With the help of interviews and data, we identified the mechanism to sustain cooperation in the union, which is surprisingly similar to the belief-free equilibrium identified in the theoretical literature on repeated games with private monitoring.