What Goes Around Comes Around: A Theory of Indirect Reciprocity in Networks
AbstractWe consider strategic interaction on a network of heterogeneous long-term relationships. The bilateral relationships are independent of each other in terms of actions and realized payoffs, and we assume that information regarding outcomes is private to the two parties involved. In spite of this, the network can induce strategic interdependencies between relationships, which facilitate efficient outcomes. We derive necessary and sufficient conditions that characterize efficient equilibria of the network game in terms of the architecture of the underlying network, and interpret these structural conditions in light of empirical regularities observed in many social and economic networks.
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Bibliographic InfoPaper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 09-07.
Date of creation: Aug 2009
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Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-26 (All new papers)
- NEP-GTH-2009-09-26 (Game Theory)
- NEP-NET-2009-09-26 (Network Economics)
- NEP-SOC-2009-09-26 (Social Norms & Social Capital)
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- Itay Fainmesser, 2010.
"Community Structure and Market Outcomes: A Repeated Games in Networks Approach,"
2010-14, Brown University, Department of Economics.
- Itay P. Fainmesser, 2012. "Community Structure and Market Outcomes: A Repeated Games-in-Networks Approach," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 32-69, February.
- Yossi Feinberg & Willemien Kets, 2012.
1557, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Itay P. Fainmesser & David A. Goldberg, 2011. "Bilateral and Community Enforcement in a Networked Market with Simple Strategies," Working Papers 2011-2, Brown University, Department of Economics.
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