Community repeated interaction and strategic delegation

Abstract

A large population of fixed-type agents engage in exclusive pairwise relationships in a decentralized setting. At the onset, agents randomly meet in pairs under private information of individual time-invariant types. They play a voluntary contribution game. At the end of the first period, members of each pair either stay together in the second period, in which case reported information is common knowledge, or quit and meet randomly new partners, under private information of individual types. Thus, either long-term or short-term relationships may arise. We show that there are values of the parameters such that information extracted in the first period has a positive effect on social efficiency. We give an interpretation of our results in terms of advantageous delegation of decisions to uninformed agents. Finally, we consider several extensions of the model in which our results still hold.