Volume of Trade and Dynamic Network Formation in Two-Sided Economies
Roland Pongou () and
Roberto Serrano ()
No 2013-6, Working Papers from Brown University, Department of Economics
We study the long-run stability of trade networks in a two-sided economy of agents labelled men and women. Each agent desires relationships with the other type, but having multiple partners is costly. This cost-bene?t trade-o¤ results in each agent having a single-peaked utility over the number of partners?the volume of trade?, the peak being greater for men than for women. We propose a stochastic matching process in which self-interested agents form and sever links over time. Links can be added or deleted, sometimes simultaneously by a single agent. While the unperturbed process yields each pairwise stable network as an absorbing state, stochastic stability in two perturbed processes provides a signi?cant re?nement, leading respectively to egalitarian and anti-egalitarian pairwise stable networks. This has implications for the concentration on each side of the market of a random information shock. The analysis captures stylized facts, related to market fragmentation, concentration and contagion asymmetry, in several two-sided economies.
Keywords: Two-sided networks; pairwise stability; stochastic stability; herd externality; informational cascade; fragmentation; concentration; economy thinness; contagion asymmetry. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://economics.brown.edu/sites/g/files/dprerj72 ... ers/2013-6_paper.pdf (application/pdf)
Journal Article: Volume of trade and dynamic network formation in two-sided economies (2016)
Working Paper: Volume of Trade and Dynamic Network Formation in Two-Sided Economies (2016)
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:bro:econwp:2013-6
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 ().