This paper formulates an approach and a notion of stability to study repeated interaction among individuals and coalitions in which coalitions can commit in the short-term but not the long-term. We study norms of behavior that are self-enforcing in this spirit: namely, no coalition of players has a profitable one-shot deviation from this norm. In settings with perfect monitoring, a self-enforcing norm can implement any payoff that is feasible and individually rational so long as players are perfectly patient. This folk theorem coincides with that for sub-game perfect equilibria in repeated games of perfect monitoring, despite the potential for coalitional deviations. We contrast this folk theorem with an anti-folk theorem that emerges once coalitions can make secret transfers to each other. In that latter case, a self-enforcing norm implements payoffs within the "Beta-core" of the stage-game. We interpret this paper to understand how legal and political institutions can have real authority on the behavior of individuals and coalitions by shaping their expectations of future behavior.
Bio: S. Nageeb Ali is an Associate Professor of Economics at Pennsylvania State University, and obtained his Ph.D. in 2007 from Stanford University under the supervision of Susan Athey and B. Douglas Bernheim. He specializes in developing and applying tools in economic theory to study social and political interaction. His most recent work focuses on issues of privacy and social norms, the implications of inequality for voting, and how coalitions may make decisions over time. He serves on the Board of Editors for the American Economic Review, and is a frequent visitor to Microsoft Research.
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