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The formation of partnerships in social networks
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Bloch, Francis, Dutta, Bhaskar, Robin, Stéphane and Zhu, Min (2017) The formation of partnerships in social networks. Discussion Paper. Coventry: University of Warwick. Department of Economics. CRETA Discussion Paper Series (27). (Unpublished)
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Abstract
This paper analyzes the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership. If favors are costly, agents have an incentive to delay the formation of the partnership. In that case, for any initial social network, the unique Markov Perfect equilibrium results in the formation of the maximum number of partnerships when players become infinitely
patient. If favors provide benefits, agents rush to form partnerships at the cost of disconnecting other agents and the only perfect initial networks for which the maximum number of partnerships are formed are the complete and complete bipartite networks.
The theoretical model is tested in the lab. Subjects generally play according to their equilibrium strategy and the efficient outcome is obtained over 78% of the times. Decisions are affected by the complexity of the network. Two behavioral rules are observed
during the experiment: subjects accept the formation of the partnership too often and reject partnership offers when one of their neighbors is only connected to them.
| Item Type: | Working or Discussion Paper (Discussion Paper) | ||||
|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HB Economic Theory | ||||
| Divisions: | Faculty of Social Sciences > Economics | ||||
| Library of Congress Subject Headings (LCSH): | Social networks -- Economic aspects, Business enterprises -- Computer networks, Computer networks -- Econometric models, Game theory | ||||
| Series Name: | CRETA Discussion Paper Series | ||||
| Publisher: | University of Warwick. Department of Economics | ||||
| Place of Publication: | Coventry | ||||
| Official Date: | January 2017 | ||||
| Dates: |
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| Date of first compliant deposit: | 5 January 2017 | ||||
| Number: | 27 | ||||
| Number of Pages: | 46 | ||||
| Institution: | University of Warwick | ||||
| Status: | Not Peer Reviewed | ||||
| Publication Status: | Unpublished | ||||
| Access rights to Published version: | Open Access |
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