Economic Institutions and Stability: A Network Approach

CentER Working Paper Series No. 2011-084

41 Pages Posted: 3 Aug 2011

See all articles by Robert P. Gilles

Robert P. Gilles

Queen's University Management School

Emiliya A. Lazarova

Queen's University Belfast

Pieter H. M. Ruys

Tilburg University - CentER

Date Written: August 3, 2011

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.

Keywords: Cooperatives, Networks, Clubs, Network economies, Stable matchings

JEL Classification: C72, D71, D85

Suggested Citation

Gilles, Robert P. and Lazarova, Emiliya A. and Ruys, Pieter H. M., Economic Institutions and Stability: A Network Approach (August 3, 2011). CentER Working Paper Series No. 2011-084. Available at SSRN: https://ssrn.com/abstract=1904317 or http://dx.doi.org/10.2139/ssrn.1904317

Robert P. Gilles

Queen's University Management School ( email )

25 University Sq
Belfast, Northern Ireland BT7 1NN
United Kingdom

Emiliya A. Lazarova

Queen's University Belfast ( email )

25 University Square
Belfast, BT7 1NN
Ireland

Pieter H. M. Ruys (Contact Author)

Tilburg University - CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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