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When Rationality Fails

Author

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  • PHILLIP BONACICH

    (University of California, Los Angeles)

  • ELISA JAYNE BIENENSTOCK

    (University of North Carolina at Chapel Hill)

Abstract

Power differences within networks can arise when some positions have many alternative transaction partners who themselves have few alternatives. Recent social psychological models developed to predict power in these situations have assumed that stable transaction patterns will emerge in these networks. These models depend on the assumption that stable exchange patterns will develop. Using the game theoretic concept of the core, we show that in some networks, stable patterns should not emerge. Who transacts with whom and terms of the transaction should never reach equilibrium. Three types of instability are distinguished in this article: unreliability, insecurity, and variety. These types of instability are affected by the existence and size of the core. Experiments and simulations comparing networks with and without core solutions and with different-sized cores show that the predicted differences exist.

Suggested Citation

  • Phillip Bonacich & Elisa Jayne Bienenstock, 1995. "When Rationality Fails," Rationality and Society, , vol. 7(3), pages 293-320, July.
    • Handle: RePEc:sae:ratsoc:v:7:y:1995:i:3:p:293-320
    DOI: 10.1177/1043463195007003004
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    Cited by:

    1. Muñoz-Herrera, Manuel & Dijkstra, Jacob & Flache, Andreas & Wittek, Rafael, 2021. "Collaborative production networks among unequal actors," Network Science, Cambridge University Press, vol. 9(1), pages 1-17, March.
    2. Jacob Dijkstra, 2009. "Externalities in Exchange Networks," Rationality and Society, , vol. 21(4), pages 395-427, November.
    3. Dooan, Gonul & van Assen, M.A.L.M. & van de Rijt, Arnout & Buskens, Vincent, 2007. "The Stability of Exchange Networks," Coalition Theory Network Working Papers 9098, Fondazione Eni Enrico Mattei (FEEM).
    4. Gönül Dogan & M.A.L.M. van Assen & Arnout van de Rijt & Vincent Buskens, 2007. "The Stability of Exchange Networks," Working Papers 2007.66, Fondazione Eni Enrico Mattei.
    5. David Willer & John Skvoretz, 1997. "Games And Structures," Rationality and Society, , vol. 9(1), pages 5-35, February.
    6. Jacob Dijkstra & Marcel A. L. M. van Assen, 2008. "The Comparison of Four Types of Everyday Interdependencies," Rationality and Society, , vol. 20(1), pages 115-143, February.

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