Thinking about the consequences of economic networks

I just posted a new paper on multilateral matching in network economies on the game theory page. This paper is co-authored with Emiliya Lazarova (University of Birmingham) and Pieter Ruys (Tilburg University).

This paper investigates a network economy in which economic agents are connected within a structure of value-generating relationships. Agents are assumed to be able to participate in three types of economic activities: autarkic self-provision; binary matching interactions; and multi-person cooperative collaborations. We introduce two concepts of stability and provide sufficient and necessary conditions on the prevailing network structure for the existence of stable assignments, both in the absence of externalities from cooperation as well as in the presence of size-based externalities. We show that institutional elements such as the emergence of socioeconomic roles and hierarchical leadership structures are necessary for establishing stability and as such support and promote stable economic development.