Cooperation,Contracts and Social Networks: From a Bounded to a Procedural Rationality Approach

The idea of this paper is that ifdecision-making processes are more consideredin a procedural rationality assumption, thenthe interplay of trust and calculativereasoning, and, at a more collective level, theinterplay of contracts and social networks maybe clarified. We use Lindenberg's framingtheory to define enlightened self-interest asthe rationality of contractual relationships.Cooperation is then explained by thewillingness to pursue the relationship which,from the background, decreases the salience ofthe gain frame. This willingness is supportedby a process of mutual relational signaling.When temptations of opportunism are strong,cooperation needs to be embedded, first in aformal contract and then, if stakes are toohigh, in a social network. In this framework,we show that the acceptance of contractualincompleteness by the parties is a positivesignal, which favors cooperation.