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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- Yossi Feinberg & Willemien Kets, 2012.
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