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

Dynamic Network Formation in Two-Sided Economies

  • Pongou, Roland
  • Serrano, Roberto

We study the dynamic stability of networks in a two-sided economy of agents labelled men and women. Each agent desires relationships with the other type, but having multiple partners is costly. This cost-benefit trade-off results in each agent having a single-peaked utility function, the peak being greater for men than for women. We propose two stochastic Markov processes in which self-interested agents form and sever links over time, but may also take actions that do not increase their utility with small probability. In the first process, an agent who invests more time in a relationship signals commitment to his/her partner, whereas in the second, such an agent is perceived as having a weaker position. We prove that only egalitarian pairwise stable networks (in which all agents have the same number of partners) form in the long run under the first process, while under the second, only anti-egalitarian pairwise stable networks (in which all women are matched to a small number of men) arise. This latter outcome is also consistent with the presence of "herd externality" or "informational cascade", leading to a pattern of a one-sided thin market. Applying these results to communication shows that the diffusion of a given piece of information can widely vary across identical economies, and that information concentrates more in women than in men. The model sheds light on patterns of network formation in several two-sided markets, including employer-employee, dating, buyer-seller, and faculty-student relationships.

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://mpra.ub.uni-muenchen.de/46021/1/MPRA_paper_46021.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46021.

as
in new window

Length:
Date of creation: 09 Apr 2013
Date of revision:
Handle: RePEc:pra:mprapa:46021
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

More information through EDIRC

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. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  2. Michele Tertilt, 2005. "Polygyny, Fertility, and Savings," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1341-1370, December.
  3. Echenique, Federico & Oviedo, Jorge, 2006. "A theory of stability in many-to-many matching markets," Theoretical Economics, Econometric Society, vol. 1(2), pages 233-273, June.
  4. Frank H. Page Jr. & Myrna H. Wooders & Samir Kamat, 2002. "Networks and Farsighted Stability," Computing in Economics and Finance 2002 370, Society for Computational Economics.
  5. Jackson, Matthew O. & van den Nouweland, Anne, 2002. "Strongly Stable Networks," Working Papers 1147, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  7. Matthew O. Jackson & Francis Bloch, 2004. "The Formation of Networks with Transfers among Players," Working Papers 2004.80, Fondazione Eni Enrico Mattei.
  8. Dutta, B. & van den Nouweland, C.G.A.M. & Tijs, S.H., 1995. "Link formation in cooperative situations," Discussion Paper 1995-35, Tilburg University, Center for Economic Research.
  9. Pongou, Roland & Serrano, Roberto, 2013. "Fidelity Networks and Long-Run Trends in HIV/AIDS Gender Gaps," MPRA Paper 47232, University Library of Munich, Germany, revised 30 Sep 2014.
  10. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  11. Roland Pongou & Roberto Serrano, 2009. "A dynamic theory of fidelity networks with an application to the spread of HIV/AIDS," Working Papers 2009-03, Instituto Madrile├▒o de Estudios Avanzados (IMDEA) Ciencias Sociales.
  12. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. BERGIN, James & LIPMAN, Bart, 1994. "Evolution with State-Dependent Mutations," CORE Discussion Papers 1994055, Universit├ę catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. H. Peyton Young, 2009. "Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning," American Economic Review, American Economic Association, vol. 99(5), pages 1899-1924, December.
  15. M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
  16. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  17. Staudigl, Mathias, 2011. "Potential games in volatile environments," Games and Economic Behavior, Elsevier, vol. 72(1), pages 271-287, May.
  18. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
  19. Alvin E. Roth, 2006. "Repugnance as a Constraint on Markets," Levine's Bibliography 321307000000000629, UCLA Department of Economics.
  20. Becker, Gary S, 1974. "A Theory of Marriage: Part II," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S11-S26, Part II, .
  21. Matthew O. Jackson & Leeat Yariv, 2007. "Diffusion of Behavior and Equilibrium Properties in Network Games," American Economic Review, American Economic Association, vol. 97(2), pages 92-98, May.
  22. Robert Schoen & William Urton & Karen Woodrow & John Bai, 1985. "Marriage and divorce in twentieth century American cohorts," Demography, Springer, vol. 22(1), pages 101-114, February.
  23. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  24. Slikker, Marco & van den Nouweland, Anne, 2001. "A One-Stage Model of Link Formation and Payoff Division," Games and Economic Behavior, Elsevier, vol. 34(1), pages 153-175, January.
  25. Roth, Alvin E & Vande Vate, John H, 1990. "Random Paths to Stability in Two-Sided Matching," Econometrica, Econometric Society, vol. 58(6), pages 1475-80, November.
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:pra:mprapa:46021. 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: (Ekkehart Schlicht)

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.