The formation of partnerships in social networks

Francis Bloch, Bhaskar Dutta, Stéphane Robin and Min Zhu
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Stéphane Robin: Université de Lyon
Min Zhu: Beijing Normal University

CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA

Abstract: This paper analyzes the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership. If favors are costly, agents have an incentive to delay the formation of the partnership. In that case, for any initial social network, the unique Markov Perfect equilibrium results in the formation of the maximum number of partnerships when players become infinitely patient. If favors provide benefits, agents rush to form partnerships at the cost of disconnecting other agents and the only perfect initial networks for which the maximum number of partnerships are formed are the complete and complete bipartite networks. The theoretical model is tested in the lab. Subjects generally play according to their equilibrium strategy and the efficient outcome is obtained over 78% of the times. Decisions are affected by the complexity of the network. Two behavioral rules are observed during the experiment: subjects accept the formation of the partnership too often and reject partnership offers when one of their neighbors is only connected to them.

Keywords: social networks; partnerships; matchings in networks; non-stationary networks; laboratory experiments JEL classification numbers: D85; C78; C91 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-net, nep-pay, nep-soc and nep-ure
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https://warwick.ac.uk/fac/soc/economics/research/c ... 27_-_creta_dutta.pdf

Related works:
Working Paper: The formation of partnerships in social networks (2017)
Working Paper: The formation of partnerships in social networks (2017)
Working Paper: The formation of partnerships in social networks (2017)
Working Paper: The formation of partnerships in social networks (2017)
Working Paper: The formation of partnerships in social networks (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:wcreta:27

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