Stability in a Network Economy: The Role of Institutions

Robert P. Gilles; Emiliya A. Lazarova; Pieter H. M. Ruys

doi:10.1016/j.jebo.2015.09.011

Stability in a Network Economy: The Role of Institutions

Robert P. Gilles, Emiliya A. Lazarova, Pieter H. M. Ruys

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Abstract

We consider an economy in which agents are embedded in a network of potential value-generating relationships. Agents are assumed to be able to participate in three types of economic interactions: Autarkic self-provision; bilateral interaction; and multilateral collaboration through endogenously provided platforms.
We introduce two stability concepts and provide sufficient and necessary conditions on the network structure that guarantee existence, in cases of the absence of externalities, link-based externalities and crowding externalities. We show that institutional arrangements based on socioeconomic roles and leadership guarantee stability. In particular, the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions. We investigate strict social hierarchies, tiered leadership structures and global market places.

Original language	English
Pages (from-to)	375-399
Number of pages	25
Journal	Journal of Economic Behavior & Organization
Volume	119
Early online date	18 Sept 2015
DOIs	https://doi.org/10.1016/j.jebo.2015.09.011
Publication status	Published - Nov 2015

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10.1016/j.jebo.2015.09.011

Stability in a Network Economy: ?The Role of Institutions
© 2015 Elsevier B.V. All rights reserved. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ which permits distribution and reproduction for non-commercial purposes, provided the author and source are cited.
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Rob Gilles
- r.gillesqub.acuk
- Queen's Business School (QBS) - Professor
- Economics
Person: Academic

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AU - Lazarova, Emiliya A.

AU - Ruys, Pieter H. M.

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AB - We consider an economy in which agents are embedded in a network of potential value-generating relationships. Agents are assumed to be able to participate in three types of economic interactions: Autarkic self-provision; bilateral interaction; and multilateral collaboration through endogenously provided platforms.We introduce two stability concepts and provide sufficient and necessary conditions on the network structure that guarantee existence, in cases of the absence of externalities, link-based externalities and crowding externalities. We show that institutional arrangements based on socioeconomic roles and leadership guarantee stability. In particular, the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions. We investigate strict social hierarchies, tiered leadership structures and global market places.

U2 - 10.1016/j.jebo.2015.09.011

DO - 10.1016/j.jebo.2015.09.011

M3 - Article

SN - 0167-2681

VL - 119

SP - 375

EP - 399

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

ER -

Stability in a Network Economy: The Role of Institutions

Abstract

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Rob Gilles

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