THIRD PARTY SANCTIONS IN GAMES WITH COMMUNICATION

This paper discusses the relation between communication and preservation of social norms guarded by third-party sanctions. In 2001 Jonathan Bendor and Piotr Swistak derived deductively the existence of such norms from a simple boundedly rational choice model. Their analysis was based on a perfect public information case. We take into account communication and analyse at the micro level the process of production and interpretation of information on which decisions are based. We show that when information is fully private and we allow for communication a state of anomie can result. If some social control mechanisms are available, social stability can be maintained. The less efficient the social control mechanisms however, the more restrictive rules will be needed to sustain the social norms. Furthermore not all cognitive strategies for interpreting received messages are equally effective. Strategies based on reputation are better than strategies based on profit analysis.