Strategic tie formation for long-term exchange relations

Abstract

Theory and empirical research have established that repeated interactions foster cooperation in social dilemmas. These effects of repeated interactions are meanwhile well known. Given these effects, actors have incentives for strategic tie formation in social dilemmas: they have incentives to establish long-term relations involving repeated interactions. Perhaps surprisingly, models accounting for strategic tie formation are scarce. We introduce and analyze a new game-theoretic model that captures the well-known effects of repeated interactions, while simultaneously endogenizing the formation of long-term relations. We assume strict game-theoretic rationality as well as self-regarding preferences. We highlight the commitment feature of tie formation: through establishing a long-term relation, at cost, actors ensure that they would suffer themselves from future sanctions of own opportunism. This allows for mutually beneficial cooperation in the first place. Some extensions of the model are discussed.

Game-theoretic models

“…Agents' extrinsic benefits and costs result from these agents' social and institutional embeddedness (Buskens & Raub 2013). For example, agent 2, by choosing D, may forgo the benefits from future exchanges (+b) that would accrue in a long-term exchange relation (Przepiorka & Diekmann 2013, Raub et al 2019, suffer similar consequences from losing their good reputation (Shapiro 1983, Przepiorka 2013, or be negatively sanctioned by their peers or law enforcement (-c) (Diekmann & Przepiorka 2015, Gambetta & Przepiorka 2019.…”

Prerequisites For Collective Opportunism At Corporate Enterprises

“…The social relations between people are based on previous interactions' experience evolved in response to acts of individuals in the team. If the previous experience is regarded as successful, it is possible to deter opportunistic behaviors due to trust level (Raub et al, 2019). It is particularly noteworthy that an individual exhibits its opportunistic behaviors to varying degrees in different environments.…”

Context Of The Term “Opportunism” In Economic Science

“…Emerging social relations are the result of past actions, but can change under the influence of various factors on them. In the case of constant successful interaction between participants, a certain level of trust established, which acts as a deterrent to opportunism (Raub, Buskens, & Frey, 2019). The absence of established norms of behavior or a violation of established ones leads to opportunism.…”