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Economic Institutions and Stability: A Network Approach

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  • Robert P. Gilles
  • Emiliya A. Lazarova
  • Pieter H.M. Ruys

Abstract

We consider a network economy in which economic agents are connected within a structure of value-generating relationships. Agents are assumed to be able to participate in three types of economic activities: autarkic self-provision; binary matching interactions; and multi-person cooperative collaborations. We introduce two concepts of stability and provide sufficient and necessary conditions on the prevailing network structure for the existence of stable assignments, both in the absence of externalities from cooperation as well as in the presence of size-based externalities. We show that institutional elements such as the emergence of socioeconomic roles and hierarchical leadership structures are necessary for establishing stability and as such support and promote stable economic development.

Suggested Citation

  • Robert P. Gilles & Emiliya A. Lazarova & Pieter H.M. Ruys, 2011. "Economic Institutions and Stability: A Network Approach," Economics Working Papers 11-04, Queen's Management School, Queen's University Belfast.
    • Handle: RePEc:qub:wpaper:1104
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cooperatives; Networks; Clubs; Network economies; Stable matchings;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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