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Listen before you link: Optimal monitoring rules for communication networks

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  • Safi, Shahir
Abstract
I consider environments where communication networks are endogenous, but monitoring rules enforce agents to ask consent from others to form new links or break their existing links. A monitoring rule consists of a number x and a collection of groups O such that each agent requires consent from x number of agents in every group she belongs to. First, I show that efficient networks can have at most one component when externalities are positive, whereas they can have multiple components when externalities are negative. Second, I find that partitioning set of agents into groups based on components of the efficient network forms “smallest groups” that can internalize all of externalities; therefore, they can stabilize the efficient network with minimum number of monitors. I relate this finding to the widespread adoption of “small work groups with few monitors” (like Quality Circles) by quality management programs to enhance communication between developers.

Suggested Citation

  • Safi, Shahir, 2022. "Listen before you link: Optimal monitoring rules for communication networks," Games and Economic Behavior, Elsevier, vol. 133(C), pages 230-247.
    • Handle: RePEc:eee:gamebe:v:133:y:2022:i:c:p:230-247
    DOI: 10.1016/j.geb.2022.03.004
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    More about this item

    Keywords

    Communication networks; Organizations; Externalities; Consents;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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