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Networks of Relations

  • Spagnolo, Giancarlo

    ()

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

  • Lippert, Steffen

    ()

    (University of Toulouse 1 and University of Mannheim)

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.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 570.

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Length: 43 pages
Date of creation: 27 Nov 2004
Date of revision: 03 May 2005
Handle: RePEc:hhs:hastef:0570
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