Community Structure and Market Outcomes: A Repeated Games in Networks Approach

Itay Fainmesser ()

No 2010-14, Working Papers from Brown University, Department of Economics

Abstract: Consider a large market with asymmetric information, in which sellers choose whether to cooperate or deviate and ?cheat?their buyers, and buyers decide whether to re-purchase from di§erent sellers. We model active trade relationships as links in a buyer-seller network and suggest a framework for studying repeated games in such networks. In our framework, buyers and sellers have rich yet incomplete knowledge of the network structure; allowing us to derive meaningful conditions that determine whether a network is consistent with trade and cooperation between every buyer and seller that are connected. We show that three network features reduce the minimal discount factor necessary for sustaining cooperation: moderate competition, sparseness, and segregation. We ? nd that the incentive constraints rule out networks that maximize the volume of trade and that the constrained trade maximizing networks are in between ?old world? segregated and sparse networks, and a ?global market?

Keywords: Buyer-Seller networks; repeated games; moral hazard; asymmetric information; trust; cooperation; institutions (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://economics.brown.edu/sites/g/files/dprerj72 ... rs/2010-14_paper.pdf (application/pdf)

Related works:
Journal Article: Community Structure and Market Outcomes: A Repeated Games-in-Networks Approach (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bro:econwp:2010-14

Access Statistics for this paper

More papers in Working Papers from Brown University, Department of Economics Department of Economics, Brown University, Providence, RI 02912.
Bibliographic data for series maintained by Brown Economics Webmaster ().