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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
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    File URL: https://dp.ashoka.edu.in/ash/wpaper/paper09_0.pdf
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    References listed on IDEAS

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    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.

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    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

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