Assortative matching with network spillovers
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Assortative matching with network spillovers. / Bjerre-nielsen, Andreas.
In: Journal of Economic Theory, Vol. 187, 105028, 01.05.2020.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Assortative matching with network spillovers
AU - Bjerre-nielsen, Andreas
PY - 2020/5/1
Y1 - 2020/5/1
N2 - This paper investigates endogenous network formation by heterogeneous agents. The agents' types determine the value of linking and we incorporate spillovers as utility from indirect connections. We provide sufficient conditions for a class of networks with sorting to be stable for low to moderate spillovers; with only two types these networks are the unique pairwise stable ones. We also show that this sorting is suboptimal for moderate to high spillovers despite otherwise obeying the conditions for sorting in Becker (1973). This shows that in our sorted networks a tension between stability and efficiency is present. We analyze a policy tool to mitigate suboptimal sorting.
AB - This paper investigates endogenous network formation by heterogeneous agents. The agents' types determine the value of linking and we incorporate spillovers as utility from indirect connections. We provide sufficient conditions for a class of networks with sorting to be stable for low to moderate spillovers; with only two types these networks are the unique pairwise stable ones. We also show that this sorting is suboptimal for moderate to high spillovers despite otherwise obeying the conditions for sorting in Becker (1973). This shows that in our sorted networks a tension between stability and efficiency is present. We analyze a policy tool to mitigate suboptimal sorting.
KW - Faculty of Social Sciences
KW - Network formation
KW - Under-connectivity
KW - Assortative matching
KW - Network externalities
KW - One-sided matching
U2 - 10.1016/j.jet.2020.105028
DO - 10.1016/j.jet.2020.105028
M3 - Journal article
VL - 187
JO - Journal of Economic Theory
JF - Journal of Economic Theory
SN - 0022-0531
M1 - 105028
ER -
ID: 241043376