Economic Institutions and Stability: A Network Approach

R.P. Gilles, E.A. Lazarova, P.H.M. Ruys

Research output: Working paperDiscussion paperOther research output

Abstract

We consider 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 organizations based on hierarchical leadership structures are necessary for establishing stability and as such support and promote stable economic development.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Volume2011-084
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-084

Keywords

  • Cooperatives
  • Networks
  • Clubs
  • Network economies
  • Stable matchings

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