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Networks of Relations

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  • Spagnolo, Giancarlo

    (Stockholm School of Economics, Consip Spa, and CEPR.)

  • Lippert, Steffen

    (University of Toulouse 1 and University of Mannheim)

Abstract

We model networks of relational (or implicit)contracts, exploring how sanctioning power and equilibrium conditions change under different network configurations and information transmission technologies. In our model, relations are the links, and the value of the network lies in its ability to enforce cooperative agreements that could not be sustained if agents had no access to other network members’ sanctioning power and information. We identify conditions for network stability and in-network information transmission as well as conditions under which stable subnetworks inhibit more valuable larger networks.

Suggested Citation

  • Spagnolo, Giancarlo & Lippert, Steffen, 2004. "Networks of Relations," SSE/EFI Working Paper Series in Economics and Finance 570, Stockholm School of Economics, revised 04 Jun 2010.
    • Handle: RePEc:hhs:hastef:0570
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    More about this item

    Keywords

    Networks; Relational Contracts; Peering; Indirect Multimarket Contact; Information transmission; Social Capital.;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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