A model of informal favor exchange on networks
Virginie Masson (),
Angus Moore and
Mandar Oak ()
Journal of Public Economic Theory, 2018, vol. 20, issue 5, 639-656
We develop a model of informal favor exchange within a social network where the cost of providing a favor is stochastic. The community has a norm, which specifies a cost threshold under which one should perform a favor if asked, as well as a punishment—exclusion from the network of the “noncompliers,” that is, of those who do not perform favors despite their cost being below the threshold, and those who refuse to punish nonperformers. We show that there always exists a cost threshold such that all agents participating in the favor exchange system receive strictly positive expected utility, and the system is a stable system. For systems involving stars and regular networks, we provide an ordering of the highest cost threshold supporting their stability. We also identify the conditions under which systems are efficient and show that, among all efficient systems, the one with the complete network provides the highest sum of expected utilities. An efficient system, however, need not be stable.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:20:y:2018:i:5:p:639-656
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923
Access Statistics for this article
Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders
More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().