The Good, the Bad and the Cunning: How Networks Make or Break Cooperation

Abstract

Groups often find themselves in a position to self-govern: sometimes a formal governing apparatus is weak or nonexistent; sometimes the legal system is underdeveloped, heavily back-logged or inapplicable; and sometimes groups simply have a preference for informal processes. In such cases, contrary to the Hobbesian vision of a self-help nightmare, groups often fare remarkably well both cooperating internally and coexisting with other groups. Diffuse punishment institutions induce cooperation well in tight-knit groups: the theory is well-understood and empirical examples abound. In many realistic settings, though, groups are imperfectly tight-knit, especially when populations are large or sparse or when communications technology is poor (even Facebook networks with very low-cost links are incomplete). Here I relate cooperation to a group's exact structure of communication to identify the role that networks play in making or breaking cooperation. By generalizing the game-theoretic model in Fearon and Laitin (1996), I present a model flexible enough to account for the various ways that a group may be imperfectly tight-knit.