Reciprocity and Rule Preferences of a Rotating Savings and Credit Association (ROSCA) in China: Evolutionary Simulation in Imitation Games

Abstract

As one method of cooperation in human society, informal financial institutions, such as a ROSCA, demonstrate huge rule disparities temporally and geographically. In this paper, we attempt to understand whether and how people’s preference of a ROSCA is related to the reciprocity level in a particular society. After conducting evolutionary imitation games among the population, the results show that each ROSCA rule evolves as if it finds its niche formed by the peoples’ different levels of reciprocity. Our simulation also reproduced the social states where different ROSCAs co-exist with others at an equilibrium even when some rules clearly dominate others. These results provide a new insight into the theory of collective rule choice that triggers the evolution of cooperation.