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Cooperation in partly observable networked markets

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  • Fainmesser, Itay P.
  • Goldberg, David A.

Abstract

We present a model of repeated games in large two-sided networks between clients and agents in the presence of third-party observability networks via which clients share information about past transactions. The model allows us to characterize cooperation networks—networks in which each agent cooperates with every client that is connected to her. To this end, we show that: [1] an agent a's incentives to cooperate depend only on her beliefs with respect to her local neighborhood—a subnetwork that includes agent a and is of a size that is independent of the size of the entire network; and [2] when an agent a observes the network structure only partially, her incentives to cooperate can be calculated as if the network were a random tree with agent a at its root.

Suggested Citation

  • Fainmesser, Itay P. & Goldberg, David A., 2018. "Cooperation in partly observable networked markets," Games and Economic Behavior, Elsevier, vol. 107(C), pages 220-237.
    • Handle: RePEc:eee:gamebe:v:107:y:2018:i:c:p:220-237
    DOI: 10.1016/j.geb.2017.11.008
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    2. Nava, Francesco & Piccione, Michele, 2012. "Efficiency in repeated games with local interaction and uncertain local monitoring," LSE Research Online Documents on Economics 54250, London School of Economics and Political Science, LSE Library.
    3. , & ,, 2014. "Efficiency in repeated games with local interaction and uncertain local monitoring," Theoretical Economics, Econometric Society, vol. 9(1), January.
    4. Fainmesser, Itay P., 2019. "Exclusive intermediation in unobservable networks," Games and Economic Behavior, Elsevier, vol. 113(C), pages 533-548.
    5. Itay Fainmesser, 2014. "Exclusive Intermediation," Working Papers 2014-3, Brown University, Department of Economics.
    6. Zhang, Shuhua & Zhang, Zhipeng & Wu, Yu’e & Yan, Ming & Li, Yu, 2019. "Strategy preference promotes cooperation in spatial evolutionary games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 181-188.

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    More about this item

    Keywords

    Networks; Trust; Graph theory; Repeated games; Community enforcement;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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