Standards of Behavior and Time Generate Tacit Cooperation in a Hierarchical Relationship

This paper provides a game theoritic rationale for the use of standards of behavior in hierarchies. lt proves that the common knowledge of such standards in a long term relationship generates tacit cooperation as long as the time horizon is far enough and that intermediary observations are feasible. Though mathematically similar to the well known equation effect it is argued that the observed result is more robust with respect to the players incentive to view their relationship through such a formalization.