Economic Institutions and Stability: A Network Approach
AbstractWe consider a network economy in which economic agents are connected within a structure of value-generating relationships. Agents are assumed to be able to participate in three types of economic activities: autarkic self-provision; binary matching interactions; and multi-person cooperative collaborations. We introduce two concepts of stability and provide sufficient and necessary conditions on the prevailing network structure for the existence of stable assignments, both in the absence of externalities from cooperation as well as in the presence of size-based externalities. We show that institutional elements such as the emergence of socioeconomic roles and organizations based on hierarchical leadership structures are necessary for establishing stability and as such support and promote stable economic development.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-084.
Date of creation: 2011
Date of revision:
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Cooperatives; Networks; Clubs; Network economies; Stable matchings;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-29 (All new papers)
- NEP-GTH-2011-08-29 (Game Theory)
- NEP-HME-2011-08-29 (Heterodox Microeconomics)
- NEP-MIC-2011-08-29 (Microeconomics)
- NEP-NET-2011-08-29 (Network Economics)
- NEP-SOC-2011-08-29 (Social Norms & Social Capital)
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