Self Governance in Social Networks of Information Transmission
AbstractThis paper studies the problem of self governance in a model in which information flows are governed by the community structure. In each round of an infinitely repeated game, an agent and an investor, who is selected from a finite set of investors, play a trust game. Investors receive information only from their own social contacts and may act upon after receiving news about opportunistic behavior. We explore the social networks leading to self governance and emphasize how the architecture of such networks is shaped by the technology with which surplus can be created in each round. We formally show how the details of the transactions determine the density and cohesiveness of the social network. An application to the interaction between formal and informal institutions of exchange is provided, and it is shown that markets may harm networked relationships by deteriorating the monitoring quality.JEL classification numbers: D85, C73, L14, D82.
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Bibliographic InfoPaper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 290.
Date of creation: 2012
Date of revision:
Find related papers by JEL classification:
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Felipe Balmaceda & Juan Escobar, 2013.
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40, Facultad de Economía y Empresa, Universidad Diego Portales.
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