Performance and turnover in a stochastic partnership
Journal Article (Journal Article)
Suppose that players in a stochastic partnership have the option to quit and rematch anonymously. If stage-game payoffs are subject to a persistent initial shock, the (unique) social welfare-maximizing equilibrium induces a "dating" process in which all partners enjoy the full potential equilibrium gains from each match. By contrast, maximizing social welfare in non-stochastic repeated games with rematching requires that players burn money or otherwise fail to realize all potential equilibrium gains. Comparative statics on welfare and turnover are also provided, consistent with documented patterns of "survivorship bias" and "honeymoon".
Full Text
Duke Authors
Cited Authors
- McAdams, D
Published Date
- November 1, 2011
Published In
Volume / Issue
- 3 / 4
Start / End Page
- 107 - 142
Electronic International Standard Serial Number (EISSN)
- 1945-7685
International Standard Serial Number (ISSN)
- 1945-7669
Digital Object Identifier (DOI)
- 10.1257/mic.3.4.107
Citation Source
- Scopus