IDEAS home Printed from https://ideas.repec.org/p/ash/wpaper/09.html
   My bibliography  Save this paper

Efficient Partnership Formation In Networks

Author

Listed:
  • Francis Bloch

    (Université Paris 1 and Paris School of Economics)

  • Bhaskar Dutta

    (University of Warwick and Department of Economics, Ashoka University)

  • Mihai Manea

    (Stony Brook University)

Abstract

We analyze the formation of partnerships in social networks. Players need favors at random times and ask their neighbors in the network to form exclusive long-term partnerships that guarantee reciprocal favor exchange. Refusing to provide a favor results in the automatic removal of the underlying link. Players agree to provide the ï¬ rst favor in a partnership only if they otherwise face the risk of eventual isolation. In equilibrium, players essential for realizing every maximum matching can avoid this risk and enjoy higher payoffsthaninessentialplayers.Althoughthesearchforpartnersisdecentralizedandreflects local partnership opportunities, the strength of essential players drives efficient partnership formation in every network. Equilibrium behavior is determined by the classiï¬ cation of nodes in the Gallai-Edmonds decomposition of the underlying network.

Suggested Citation

  • Francis Bloch & Bhaskar Dutta & Mihai Manea, 2018. "Efficient Partnership Formation In Networks," Working Papers 09, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:09
    as

    Download full text from publisher

    File URL: https://dp.ashoka.edu.in/ash/wpaper/paper09_0.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:cup:cbooks:9780511771576 is not listed on IDEAS
    2. Attila Ambrus & Markus Mobius & Adam Szeidl, 2014. "Consumption Risk-Sharing in Social Networks," American Economic Review, American Economic Association, vol. 104(1), pages 149-182, January.
    3. Yann Bramoullé & Andrea Galeotti & Brian Rogers, 2016. "The Oxford Handbook of the Economics of Networks," Post-Print hal-01447842, HAL.
    4. Francis Bloch & Bhaskar Dutta & Stéphane Robin & Min Zhu, 2016. "The formation of partnerships in social networks," Post-Print halshs-01421347, HAL.
    5. Alvin E. Roth & Tayfun Sönmez & M. Utku Ünver, 2004. "Kidney Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 457-488.
    6. Yann Bramoullé & Andrea Galeotti & Brian Rogers, 2016. "The Oxford Handbook of the Economics of Networks," Post-Print hal-03572533, HAL.
    7. Dean Karlan & Markus Mobius & Tanya Rosenblat & Adam Szeidl, 2009. "Trust and Social Collateral," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1307-1361.
    8. Matthew O. Jackson & Tomas Rodriguez-Barraquer & Xu Tan, 2012. "Social Capital and Social Quilts: Network Patterns of Favor Exchange," American Economic Review, American Economic Association, vol. 102(5), pages 1857-1897, August.
    9. Arnold Polanski, 2016. "Matching structure and bargaining outcomes in buyer–seller networks," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(4), pages 767-776, April.
    10. Polanski, Arnold, 2007. "Bilateral bargaining in networks," Journal of Economic Theory, Elsevier, vol. 134(1), pages 557-565, May.
    11. Bramoulle, Yann & Galeotti, Andrea & Rogers, Brian (ed.), 2016. "The Oxford Handbook of the Economics of Networks," OUP Catalogue, Oxford University Press, number 9780199948277.
    12. Roth, Alvin E. & Sonmez, Tayfun & Utku Unver, M., 2005. "Pairwise kidney exchange," Journal of Economic Theory, Elsevier, vol. 125(2), pages 151-188, December.
    13. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.
    14. Francis Bloch & Bhaskar Dutta & Stéphane Robin & Min Zhu, 2018. "An experimental study of partnership formation in social networks," Working Papers 1009, Ashoka University, Department of Economics.
    15. Bramoullé, Yann & Kranton, Rachel, 2007. "Risk-sharing networks," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 275-294.
    16. Francis Bloch & Bhaskar Dutta & Stéphane Robin, 2018. "An experimental study of partnership formation in social networks," Working Papers 05, Ashoka University, Department of Economics.
    17. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
    18. Anna Bogomolnaia & Herve Moulin, 2004. "Random Matching Under Dichotomous Preferences," Econometrica, Econometric Society, vol. 72(1), pages 257-279, January.
    19. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-2080, August.
    20. Easley,David & Kleinberg,Jon, 2010. "Networks, Crowds, and Markets," Cambridge Books, Cambridge University Press, number 9780521195331, September.
    21. 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.
    22. de Martí Beltran, Joan, 2009. "Matthew O. Jackson, Social and Economic Networks , Princeton University Press (2008)," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 644-645, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhiwei Cui & Yan-An Hwang & Ding-Cheng You, 2021. "Axiomatizations of the $$\beta $$ β and the score measures in networks," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(2), pages 399-418, June.
    2. Ayse Yazici, 2022. "Decentralized Matching at Senior-Level: Stability and Incentives," Department of Economics Working Papers 2022_01, Durham University, Department of Economics.
    3. Oguzhan Celebi, 2023. "Substitutability in Favor Exchange," Papers 2309.10749, arXiv.org.
    4. Yazıcı, Ayşe, 2022. "Decentralized matching at senior-level: Stability and incentives," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    5. Alejandro Francetich, 2023. "When partner knows best: asymmetric expertise in partnerships," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 363-399, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francis Bloch & Bhaskar Dutta & Mihai Manea, 2019. "Efficient Partnership Formation In Networks," Working Papers 1014, Ashoka University, Department of Economics.
    2. Francis Bloch & Bhaskar Dutta & Stéphane Robin & Min Zhu, 2016. "The formation of partnerships in social networks," Post-Print halshs-01421347, HAL.
    3. Jackson, Matthew O. & Zenou, Yves, 2015. "Games on Networks," Handbook of Game Theory with Economic Applications,, Elsevier.
    4. Goyal, S., 2016. "Networks and Markets," Cambridge Working Papers in Economics 1652, Faculty of Economics, University of Cambridge.
    5. Boosey, Luke & Mark Isaac, R., 2016. "Asymmetric network monitoring and punishment in public goods experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PA), pages 26-41.
    6. Matthew Elliott & Arun Chandrasekhar & Attila Ambrus, 2015. "Social Investments, Informal Risk Sharing, and Inequality," 2015 Meeting Papers 189, Society for Economic Dynamics.
    7. Attila Ambrus & Arun G. Chandrasekhar & Matt Elliott, 2014. "Social Investments, Informal Risk Sharing, and Inequality," NBER Working Papers 20669, National Bureau of Economic Research, Inc.
    8. Abreu, Dilip & Manea, Mihai, 2012. "Bargaining and efficiency in networks," Journal of Economic Theory, Elsevier, vol. 147(1), pages 43-70.
    9. Cho, Myeonghwan, 2021. "Trading networks of price-taking buyers and sellers," Journal of Economic Theory, Elsevier, vol. 196(C).
    10. Talamàs, Eduard, 2019. "Price dispersion in stationary networked markets," Games and Economic Behavior, Elsevier, vol. 115(C), pages 247-264.
    11. Antonio Cabrales & Piero Gottardi & Fernando Vega-Redondo, 2017. "Risk Sharing and Contagion in Networks," The Review of Financial Studies, Society for Financial Studies, vol. 30(9), pages 3086-3127.
    12. Bedayo, Mikel & Mauleon, Ana & Vannetelbosch, Vincent, 2016. "Bargaining in endogenous trading networks," Mathematical Social Sciences, Elsevier, vol. 80(C), pages 70-82.
    13. Abreu, Dilip & Manea, Mihai, 2012. "Markov equilibria in a model of bargaining in networks," Games and Economic Behavior, Elsevier, vol. 75(1), pages 1-16.
    14. Francis Bloch & Bhaskar Dutta & Stéphane Robin & Min Zhu, 2018. "An experimental study of partnership formation in social networks," Working Papers 1009, Ashoka University, Department of Economics.
    15. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2017. "The Economic Consequences of Social-Network Structure," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 49-95, March.
    16. BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012. "Bargaining and delay in trading networks," LIDAM Discussion Papers CORE 2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    17. Joshi, Sumit & Mahmud, Ahmed Saber, 2020. "Sanctions in networks," European Economic Review, Elsevier, vol. 130(C).
    18. Francis Bloch & Bhaskar Dutta & Stéphane Robin, 2018. "An experimental study of partnership formation in social networks," Working Papers 05, Ashoka University, Department of Economics.
    19. Sanjeev Goyal, 2015. "Networks in Economics: A Perspective on the Literature," Cambridge Working Papers in Economics 1548, Faculty of Economics, University of Cambridge.
    20. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2016. "Networks: An Economic Perspective," Papers 1608.07901, arXiv.org.

    More about this item

    Keywords

    decentralized markets;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ash:wpaper:09. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ashoka University (email available below). General contact details of provider: https://www.ashoka.edu.in .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.