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

Networks of relations and Word-of-Mouth Communication

  • Lippert, Steffen
  • Spagnolo, Giancarlo

We study networks of relations - groups of agents linked by several cooperative relationships - exploring equilibrium conditions under different network configurations and information structures. Relationships are the links through which soft information can flow, and the value of a network lies in its ability to enforce agreements that could not be sustained without the information and sanctioning power provided by other network members. The model explains why network closure is important; why stable subnetworks may inhibit more valuable larger networks; and why information flows and action choices cannot be analyzed separately. Contagion strategies are suboptimal here, as they inhibit information transmission, delaying punishments.

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.sciencedirect.com/science/article/B6WFW-50XV9BW-1/2/1d94a1e8111725f81efbcb37d12ee2ac
Download Restriction: Full text for ScienceDirect subscribers only

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 Elsevier in its journal Games and Economic Behavior.

Volume (Year): 72 (2011)
Issue (Month): 1 (May)
Pages: 202-217

as
in new window

Handle: RePEc:eee:gamebe:v:72:y:2011:i:1:p:202-217
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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. Francis Bloch & Garance Genicot & Debraj Ray, 2007. "Reciprocity in Groups and the Limits to Social Capital," American Economic Review, American Economic Association, vol. 97(2), pages 65-69, May.
  2. Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tariff Cooperation during the Formation of Customs Unions," NBER Working Papers 4543, National Bureau of Economic Research, Inc.
  3. E. Kohlberg & J.-F. Mertens, 1998. "On the Strategic Stability of Equilibria," Levine's Working Paper Archive 445, David K. Levine.
  4. Rafael Rob & Arthur Fishman, 2005. "Is Bigger Better? Customer Base Expansion through Word-of-Mouth Reputation," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1146-1175, October.
  5. Mamoru Kaneko & J. Jude Kline, 2006. "Inductive Game Theory: A Basic Scenario," IEAS Working Paper : academic research 06-A001, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  6. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  7. David A. Miller & S. Nageeb Ali, 2009. "Enforcing Cooperation in Networked Societies," 2009 Meeting Papers 115, Society for Economic Dynamics.
  8. Martin Brown & Armin Falk & Ernst Fehr, 2004. "Relational Contracts and the Nature of Market Interactions," Econometrica, Econometric Society, vol. 72(3), pages 747-780, 05.
  9. Matthew O. Jackson & Alison Watts, 2000. "On the Formation of Interaction Networks in Social Coordination Games," Econometric Society World Congress 2000 Contributed Papers 0778, Econometric Society.
  10. van Damme,Eric, 1986. "Renegotiation-proof equilibria in repeated Prisoner`s dilemma," Discussion Paper Serie A 84, University of Bonn, Germany.
  11. Kaneko, Mamoru & Matsui, Akihiko, 1999. " Inductive Game Theory: Discrimination and Prejudices," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 101-37.
  12. John McMillan & Christopher Woodruff, 1998. "Interfirm Relationships and Informal Credit in Vietnam," William Davidson Institute Working Papers Series 132, William Davidson Institute at the University of Michigan.
  13. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  14. Francis Bloch & Garance Genicot, 2005. "Informal Insurance in Social Networks," 2005 Meeting Papers 156, Society for Economic Dynamics.
    • Francis Bloch (GREQAM and Universite de la Mediterranee), Garance Genicot (Georgetown University, and Debraj Ray (New York University and Instituto de Analisis Economico (CSIC)), 2004. "Informal Insurance in Social Networks," Working Papers gueconwpa~04-04-16, Georgetown University, Department of Economics.
  15. Narayan, Deepa & Pritchett, Lant, 1999. "Cents and Sociability: Household Income and Social Capital in Rural Tanzania," Economic Development and Cultural Change, University of Chicago Press, vol. 47(4), pages 871-97, July.
  16. Matsushima, Hitoshi, 2001. "Multimarket Contact, Imperfect Monitoring, and Implicit Collusion," Journal of Economic Theory, Elsevier, vol. 98(1), pages 158-178, May.
  17. Kramarz, Francis & Thesmar, David, 2006. "Social Networks in the Boardroom," IZA Discussion Papers 1940, Institute for the Study of Labor (IZA).
  18. Vega-Redondo, Fernando, 2006. "Building up social capital in a changing world," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 2305-2338, November.
  19. Avinash Dixit, 2001. "On Modes of Economic Governance," CESifo Working Paper Series 589, CESifo Group Munich.
  20. Spagnolo, Giancarlo, 1999. "Social relations and cooperation in organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 1-25, January.
  21. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-80, March.
  22. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Information Accumulation in Development," Seminar Papers 652, Stockholm University, Institute for International Economic Studies.
  23. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA.
  24. Glen Ellison, 2010. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Levine's Working Paper Archive 631, David K. Levine.
  25. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  26. Alessandra Casella & James E. Rauch, 1997. "Anonymous Market and Group Ties in International Trade," NBER Working Papers 6186, National Bureau of Economic Research, Inc.
  27. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
  28. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks
    [Connections: An Introduction to the Economics of Networks]
    ," Introductory Chapters, Princeton University Press.
  29. George Baker & Robert Gibbons & Kevin J. Murphy, 2001. "Bringing the Market inside the Firm?," American Economic Review, American Economic Association, vol. 91(2), pages 212-218, May.
  30. Horn, Henrik & Mavroidis, Petros C, 2001. "Economic and Legal Aspects of the Most Favoured Nation Clause," CEPR Discussion Papers 2859, C.E.P.R. Discussion Papers.
  31. Spagnolo, Giancarlo & Lippert, Steffen, 2004. "Networks of Relations," SSE/EFI Working Paper Series in Economics and Finance 570, Stockholm School of Economics, revised 03 May 2005.
  32. Matthew Haag & Roger Lagunoff, 2000. "social Norms, Local Interaction and Neighborhood Planning," Levine's Working Paper Archive 2049, David K. Levine.
  33. A. Banerjee & Drew Fudenberg, 2010. "Word-of-Mouth Communication and Social Learning," Levine's Working Paper Archive 425, David K. Levine.
  34. Jonathan Levin, 2000. "Relational Incentive Contracts," Working Papers 01002, Stanford University, Department of Economics.
  35. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
  36. Martin B. Weiss & Seung Jae Shin, 2004. "Internet Interconnection Economic Model and its Analysis: Peering and Settlement," Netnomics, Springer, vol. 6(1), pages 43-57, 04.
  37. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  38. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2004. "Who's Who in Networks. Wanted: The Key Player," Working Papers 178, Barcelona Graduate School of Economics.
  39. 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.
  40. Bull, Clive, 1987. "The Existence of Self-Enforcing Implicit Contracts," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 147-59, February.
  41. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
  42. Ben-Porath, Elchanan & Kahneman, Michael, 1996. "Communication in Repeated Games with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 70(2), pages 281-297, August.
  43. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  44. Lippert, Steffen & Spagnolo, Giancarlo, 2008. "Internet peering as a network of relations," Telecommunications Policy, Elsevier, vol. 32(1), pages 33-49, February.
  45. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, March.
  46. Bar-Isaac, Heski & Tadelis, Steven, 2008. "Seller Reputation," Foundations and Trends(R) in Microeconomics, now publishers, vol. 4(4), pages 273-351, August.
  47. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
  48. Ahn, Illtae & Suominen, Matti, 2001. "Word-of-Mouth Communication and Community Enforcement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 399-415, May.
  49. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
  50. Antoni Calvó-Armengol & Yves Zenou, 2004. "Social Networks And Crime Decisions: The Role Of Social Structure In Facilitating Delinquent Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 939-958, 08.
  51. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
  52. Spagnolo, G., 1999. "On Interdependent Supergames: Multimarket Contact, Concavity, and Collusion," Cambridge Working Papers in Economics 9914, Faculty of Economics, University of Cambridge.
  53. Jonathan Temple & Paul A. Johnson, 1998. "Social Capability And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 965-990, August.
  54. Yaron Leitner, 2004. "Financial networks: contagion, commitment, and private sector bailouts," Working Papers 02-9, Federal Reserve Bank of Philadelphia.
  55. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  56. Spagnolo, Giancarlo, 1998. "Markets and Cooperation," SSE/EFI Working Paper Series in Economics and Finance 257, Stockholm School of Economics, revised 30 Nov 1998.
  57. Paul Belleflamme & Francis Bloch, 2004. "Market sharing agreements and collusive networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 387-411, 05.
  58. W. Bentley MacLeod, 2007. "Reputations, Relationships, and Contract Enforcement," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 595-628, September.
  59. Yaron Leitner, 2005. "Financial Networks: Contagion, Commitment, and Private Sector Bailouts," Journal of Finance, American Finance Association, vol. 60(6), pages 2925-2953, December.
  60. Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1995. "Social Norms and Random Matching Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 79-109, April.
  61. Felipe Balmaceda, 2005. "Cooperation and Network Formation," Documentos de Trabajo 205, Centro de Economía Aplicada, Universidad de Chile.
  62. Banerjee, Abhijit V, 1993. "The Economics of Rumours," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 309-27, April.
  63. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  64. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
  65. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  66. Spagnolo, Giancarlo, 2002. "Globalization and Cooperative Relations," CEPR Discussion Papers 3522, C.E.P.R. Discussion Papers.
  67. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
  68. Harrington, Joseph Jr., 1995. "Cooperation in a one-shot Prisoners' Dilemma," Games and Economic Behavior, Elsevier, vol. 8(2), pages 364-377.
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:eee:gamebe:v:72:y:2011:i:1:p:202-217. 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: (Zhang, Lei)

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.