Social relations and cooperation in organizations

This paper addresses the effects of social relations on cooperation (or col lusion) in organizations (or communities). Social and production relations are modeled as separate repeated strategic interactions. "Linking" them - b y employing members of the same community or encouraging social interaction between employees - facilitates cooperation in production: (a) because of available "social capital," the slack of enforcement power present in socia l relations which may discipline behavior in the workplace; (b) because pay offs from the two relations are substitutes, therefore the linkage endogeno usly generates social capital; (c) because the linkage generates transfers of "trust"; and (d) it discloses information about agents' situation, (C) 1 999 Elsevier Science B.V. All rights reserved.