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Free riding in networks

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  • Markus Kinateder
  • Luca Paolo Merlino

Abstract

Players allocate their budgets to links, a local public good, and a private good. A player links in order to free ride on public good provided by others. We derive sufficient conditions for the existence of a Nash equilibrium, in which large contributors link to each other, while others link to them. If linking costs are sufficiently high, poorer players may contribute more and have more central positions in the network than richer ones do. In large societies, free riding reduces inequality only in networks in which it is initially low. Otherwise, richer players free ride more, as they can afford more links. Finally, we derive the policy implications for income redistribution.

Suggested Citation

  • Markus Kinateder & Luca Paolo Merlino, 2023. "Free riding in networks," ULB Institutional Repository 2013/365072, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/365072
    Note: SCOPUS: ar.j
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    References listed on IDEAS

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    Cited by:

    1. Ugo Bolletta & Luca Paolo Merlino, 2022. "Marriage Through Friends," Dynamic Games and Applications, Springer, vol. 12(4), pages 1046-1066, December.
    2. Markus Kinateder & Luca Paolo Merlino, 2021. "The Evolution of Networks and Local Public Good Provision: A Potential Approach," Games, MDPI, vol. 12(3), pages 1-12, July.
    3. Patrick Allmis & Luca Paolo Merlino, 2023. "Homophily and Specialization in Networks," Papers 2312.00457, arXiv.org.

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    More about this item

    Keywords

    Free riding; Inequality; Networks; Public goods;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D00 - Microeconomics - - General - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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