Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217104
Authors: 
Bloch, Francis
Dutta, Bhaskar
Manea, Mihai
Year of Publication: 
2019
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 14 [Year:] 2019 [Issue:] 3 [Pages:] 779-811
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 first 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 payoffs than inessential players. Although the search for partners is decentralized and reflects local partnership opportunities, the strength of essential players drives efficient partnership formation in every network. Equilibrium behavior is determined by the classification of nodes in the Gallai-Edmonds decomposition of the underlying network.
Subjects: 
Networks
efficiency
decentralized markets
partnerships
favor exchange
maximum matchings
Gallai-Edmonds decomposition
under-demanded
JEL: 
C78
D85
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/4.0/
Document Type: 
Article

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