Ecostrat cours 2

18/02/2022

To do before class
Cooperation, negotiation, conflicts of interest, and social norms
https://core-econ.org/the-economy/book/text/04.html

Cooperation = participating in a common project to generate mutual benefits. Cooperation

don’t need to be based on an agreement. examples in which players acting independently can
still achieve a cooperative outcome:
 The invisible hand: Anil and Bala chose their crops in pursuit of their own interests.
Their engagement in the village market resulted in a mutually beneficial division of
labour.
 The repeated prisoners’ dilemma: They may refrain from using Terminator for pest
control because they recognize the future losses they would suffer as a result of
abandoning IPC.
 The public goods game: Players’ willingness to punish others sustained high levels of
cooperation in many countries, without the need for agreements.
BUT sometimes when players act independently => we can have a bad result (so sometime it
is better to make an agreement).
To solve economic and social problems and to try to find an agreement, players use
negotiation. BUT negotiation doesn’t work always. Sometimes it doesn’t work because of
conflicts of interest over how the mutual gains to cooperation will be shared.
Negotiation: Sharing mutual gains :
In economics we think of people as making decisions according to their preferences : all of
the likes, dislikes, attitudes, feelings, and beliefs that motivate them. So everyone’s
preferences are individual. They may be influenced by social norms, but they reflect what
people want to do as well as what they think they ought to do.
Example : If someone find money, what are the reasons that makes him give some of it to his
friend:
 altruism : the person might be altruistic and care about the other being happy, or
about another aspect of the other’s wellbeing. (it depend how much the person is
altruist)
 fairness  : the person holding the money might think that 50–50 is fair. In this case,
the person is motivated by fairness, or what economists term inequality aversion.
 Reciprocity: The friend may have been kind to the money-finder in the past, or kind
to others, and deserves to be treated generously because of this. In this case we say
that our money-finder has reciprocal preferences.
! These social preferences all influence our behaviour, sometimes working in opposite
directions. For example, if the money-finder has strong fairness preferences but knows that
the friend is entirely selfish, the fairness preferences tempt the finder to share but the
reciprocity preferences push the finder to keep the money.!