Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 570:
Networks of Relations

Giancarlo Spagnolo () and Steffen Lippert ()

Abstract: We model networks of relational (or implicit)contracts, exploring how sanctioning power and equilibrium conditions change under different network configurations and information transmission technologies. In our model, relations are the links, and the value of the network lies in its ability to enforce cooperative agreements that could not be sustained if agents had no access to other network members’ sanctioning power and information. We identify conditions for network stability and in-network information transmission as well as conditions under which stable subnetworks inhibit more valuable larger networks.

Keywords: Networks; Relational Contracts; Peering; Indirect Multimarket Contact; Information transmission; Social Capital.; (follow links to similar papers)

JEL-Codes: D23; D43; L13; L29; O17; (follow links to similar papers)

43 pages, November 27, 2004, Revised June 4, 2010

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