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The formation of partnerships in social networks

Author

Listed:
  • Francis Bloch

    (Université Paris 1 and Paris School of Economics, 106-112 Boulevard de l’Hopital, 75647 Paris 13, France)

  • Bhaskar Dutta

    (University of Warwick and Ashoka University, CV4 7AL Coventry, UK)

  • Stéphane Robin

    (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69131 Ecully, France)

  • Min Zhu

    (School of Business, Beijing Normal University, No. 19 Xinjiekouwai Street, Beijing 100875, China)

Abstract

This paper analyzes the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership. If favors are costly, agents have an incentive to delay the formation of the partnership. In that case, for any initial social network, the unique Markov Perfect equilibrium results in the formation of the maximum number of partnerships when players become infinitely patient. If favors provide benefits, agents rush to form partnerships at the cost of disconnecting other agents and the only perfect initial networks for which the maximum number of partnerships are formed are the complete and complete bipartite networks. The theoretical model is tested in the lab. Subjects generally play according to their equilibrium strategy and the efficient outcome is obtained over 78% of the times. Decisions are affected by the complexity of the network. Two behavioral rules are observed during the experiment: subjects accept the formation of the partnership too often and reject partnership offers when one of their neighbors is only connected to them.

Suggested Citation

  • Francis Bloch & Bhaskar Dutta & Stéphane Robin & Min Zhu, 2017. "The formation of partnerships in social networks," Working Papers 1703, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:1703
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    References listed on IDEAS

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    1. Bramoulle, Yann & Galeotti, Andrea & Rogers, Brian (ed.), 2016. "The Oxford Handbook of the Economics of Networks," OUP Catalogue, Oxford University Press, number 9780199948277.
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    Cited by:

    1. Bloch, Francis & Dutta, Bhaskar & Manea, Mihai, 2019. "Efficient partnership formation in networks," Theoretical Economics, Econometric Society, vol. 14(3), July.

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    More about this item

    Keywords

    social networks; partnerships; matchings in networks; non-stationary networks; laboratory experiments;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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