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Efficient partnership formation in networks
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Bloch, Francis, Dutta, Bhaskar and Manea, Mihai (2018) Efficient partnership formation in networks. Working Paper. Coventry: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS), 2018 (1155). (Unpublished)
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Official URL: https://warwick.ac.uk/fac/soc/economics/research/w...
Abstract
We analyze the formation of partnerships in social networks. Players need favors at random times and ask their neighbors in the network to form exclusive long-term partnerships that guarantee reciprocal favor exchange. Refusing to provide a favor results in the automatic removal of the underlying link. When favors are costly, players agree to provide the first favor in a partnership only if they otherwise face the risk of eventual solitude. In equilibrium, the players essential for realizing every maximum matching can avoid this risk and enjoy higher payoffs than inessential players. Although the search for partners is decentralized and reflects local incentives, the strength of essential players drives efficient partnership formation in every network. When favors are costless, players enter partnerships at any opportunity and every maximal matching can emerge in equilibrium. In this case, efficiency is limited to special linking patterns: complete and complete bipartite networks, locally balanced bipartite networks with positive surplus, and factor-critical networks.
| Item Type: | Working or Discussion Paper (Working Paper) | ||||
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| Subjects: | H Social Sciences > HB Economic Theory | ||||
| Divisions: | Faculty of Social Sciences > Economics | ||||
| Library of Congress Subject Headings (LCSH): | Social networks -- Economic aspects, Reciprocity (Psychology), Game theory, Social groups -- Economic aspects | ||||
| Series Name: | Warwick economics research papers series (WERPS) | ||||
| Publisher: | University of Warwick. Department of Economics | ||||
| Place of Publication: | Coventry | ||||
| ISSN: | 0083-7350 | ||||
| Official Date: | February 2018 | ||||
| Dates: |
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| Volume: | 2018 | ||||
| Number: | 1155 | ||||
| Number of Pages: | 34 | ||||
| Institution: | University of Warwick | ||||
| Status: | Not Peer Reviewed | ||||
| Publication Status: | Unpublished | ||||
| Access rights to Published version: | Open Access (Creative Commons) | ||||
| Description: | This paper also appears as CRETA discussion paper 41 |
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