An Alternative to Reputation Mechanism in Modern Society: Case Study and Game-Theoretic Analysis on Labor Unions

 We present a detailed case study and game-theoretic analysis on labor unions to examine the validity of various theoretical possibilities suggested by the existing literature on the mechanism of human cooperation. The unions we studied are individual-affiliate unions in Japan, so called, community unions. The community unions are loosely knit organizations that have a very high turnover rate of members. They seem to have a small amount of social capital. Previous theoretical studies showed reputation mechanism is crucial for sustaining cooperation (Nowak and Sigmund 1998). Reputation mechanism requires much information about members’ past actions. Thus this mechanism cannot function well in loosely knit organizations, where members have very limited information. However we found that members help each other in community unions.

 What mechanism functions in the community unions? In order to solve this puzzle, we made an overlapping generation repeated game with imperfect private monitoring. We found an equilibrium to sustain cooperation that can function well in such organizations. The equilibrium strategy based on interviews to union members mainly has the following feature; a player helps the other player who he has met in the previous helping activity. Due to this feature, every player has an incentive to help cooperative players because he can meet other players who will help him in the next period. Thus this strategy can construct belief-free equilibrium in the private monitoring game. Therefore this belief-free mechanism has potentials to sustain human cooperation in loosely knit organizations in modern society.