IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Community Structure and Market Outcomes: A Repeated Games-in-Networks Approach

  • Itay P. Fainmesser

Consider a large market with asymmetric information, in which sellers have the option to "cheat" their buyers, and buyers decide whether to repurchase from different sellers. We model active trade relationships as links in a buyer-seller network and study repeated games in such networks. Endowing sellers with incomplete knowledge of the network, we derive conditions that determine whether a network is consistent with cooperation between every buyer and seller that are connected. Three network features reduce the minimal discount factor sufficient for cooperation: moderate and balanced competition, sparseness, and segregation. Incentive constraints are binding and rule out efficient networks. (JEL C73, D82, D85, Z13)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.32
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 4 (2012)
Issue (Month): 1 (February)
Pages: 32-69

as
in new window

Handle: RePEc:aea:aejmic:v:4:y:2012:i:1:p:32-69
Note: DOI: 10.1257/mic.4.1.32
Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
Email:


More information through EDIRC

Order Information: Web: https://www.aeaweb.org/subscribe.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. David Miller & Nageeb Ali, 2008. "Cooperation and Collective Enforcement in Networked Societies," 2008 Meeting Papers 970, Society for Economic Dynamics.
  2. Lippert, Steffen & Spagnolo, Giancarlo, 2005. "Networks of Relations and Social Capital," CEPR Discussion Papers 5078, C.E.P.R. Discussion Papers.
  3. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November.
  4. Jim Engle-Warnick & Robert L. Slonim, 2001. "Inferring Repeated Game Strategies From Actions: Evidence From Trust Game Experiments," Economics Series Working Papers 2001-W13, University of Oxford, Department of Economics.
  5. Giancarlo Spagnolo & Steffen Lippert, 2004. "Networks of Relations," Econometric Society 2004 North American Winter Meetings 496, Econometric Society.
  6. Ballester, Coralio & Calvó-Armengol, Antoni & Zenou, Yves, 2005. "Who’s Who in Networks. Wanted: The Key Player," CEPR Discussion Papers 5329, C.E.P.R. Discussion Papers.
  7. Simon Johnson & John McMillan & Christopher Woodruff, 2001. "Courts and Relational Contracts," NBER Working Papers 8572, National Bureau of Economic Research, Inc.
  8. Roberto Serrano & Roland Pongou, 2009. "A Dynamic Theory Of Fidelity Networks With An Application To The Spread Of Hiv/Aids," Working Papers wp2009_0909, CEMFI.
  9. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  10. Robin S. Lee & Michael Schwarz, 2009. "Interviewing in Two-Sided Matching Markets," NBER Working Papers 14922, National Bureau of Economic Research, Inc.
  11. Itay Fainmesser, 2010. "Social Networks and Unraveling in Labor Markets," Working Papers 2010-15, Brown University, Department of Economics.
  12. Galeotti, Andrea, 2005. "Consumers networks and search equilibria," Working Papers 1225, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. Markus Mobius & Adam Szeidl, 2007. "Trust and Social Collateral," NBER Working Papers 13126, National Bureau of Economic Research, Inc.
  14. Weisbuch, Gerard & Alan Kirman & Dorothea K. Herreiner, 1996. "Market Organization," Discussion Paper Serie B 391, University of Bonn, Germany.
  15. Mihm, Maximilian & Toth, Russell & Lang, Corey, 2009. "What Goes Around Comes Around: A Theory of Indirect Reciprocity in Networks," Working Papers 09-07, Cornell University, Center for Analytic Economics.
  16. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  17. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 218-244.
  18. McIntosh, Craig & Wydick, Bruce, 2005. "Competition and microfinance," Journal of Development Economics, Elsevier, vol. 78(2), pages 271-298, December.
  19. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-80, August.
  20. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  21. Ozsoylev, Han N. & Walden, Johan, 2011. "Asset pricing in large information networks," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2252-2280.
  22. Calvó-Armengol, Antoni & Zenou, Yves, 2003. "Job Matching, Social Network and Word-of-Mouth Communication," IZA Discussion Papers 771, Institute for the Study of Labor (IZA).
  23. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  24. Tanya S. Rosenblat & Markus M. Mobius, 2004. "Getting Closer or Drifting Apart?," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 971-1009, August.
  25. Hardle, Wolfgang & Kirman, Alan, 1995. "Nonclassical demand : A model-free examination of price-quantity relations in the Marseille fish market," Journal of Econometrics, Elsevier, vol. 67(1), pages 227-257, May.
  26. Bar-Isaac, Heski, 2005. "Imperfect competition and reputational commitment," Economics Letters, Elsevier, vol. 89(2), pages 167-173, November.
  27. Itay P. Fainmesser & David A. Goldberg, 2011. "Bilateral and Community Enforcement in a Networked Market with Simple Strategies," Working Papers 2011-2, Brown University, Department of Economics.
  28. Markus Kinateder, 2006. "Repeated Games Played in a Network," UFAE and IAE Working Papers 674.06, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  29. Abreu, Dilip & Manea, Mihai, 2012. "Bargaining and efficiency in networks," Journal of Economic Theory, Elsevier, vol. 147(1), pages 43-70.
  30. Dow, James, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 1-14, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:4:y:2012:i:1:p:32-69. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)

or (Michael P. Albert)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.