The literature on excess entry shows that the free-entry equilibrium number of firms may be greater than is socially optimal and proposes government entry regulation as a remedy. This article tries to show that such a policy recommendation is misleading. A two-period, three-person entry game...

What institutions can sustain cooperation in groups of strangers? Here we study the role of monetary systems. In an experiment, subjects sometimes needed help and sometimes could incur a cost to help an anonymous counterpart. In the absence of money, the intertemporal exchange of help, which...

We study the emergence of norms of cooperation in experimental economies populated by strangers interacting indefinitely and lacking formal enforcement institutions. In all treatments the efficient outcome is sustainable as an equilibrium. We address the following questions: can these economies...

Under what conditions can cooperation be sustained in a network of strangers? Here we study the role of institutions and uncover a new behavioral foundation for the use of monetary systems.In an experiment, anonymous subjects could cooperate or defect in bilateral random encounters. This...