Evolutionary Game Analysis on Group Cooperation of Heterogeneous Chaoshan Firms

Abstract

In developing global trade and commerce, firms founded by Chaoshan merchants have gradually formed informal institutions of group cooperation. This study constructs an asymmetric evolutionary game model for Chaoshan firms from the HCIA (historical and comparative institutional analysis) perspective of group cooperation institutions. Furthermore, it analyses the evolutionary path and the constraint mechanism of group cooperation institutions of heterogeneous Chaoshan firms. The results suggest that if the net payoffs to one party from cooperation are less than those from a breach, it is detrimental for both parties to continue group cooperation. When the net payoffs from cooperation are more than those from a breach, both parties choose group cooperation if reputational compensation covers the losses. Otherwise, the ultimate cooperation between both parties depends on the distribution of benefits, the profitability of cooperation, the penalty cost of a breach, the cost of cooperation and the loss from a breach suffered by adhering to cooperation.