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Title: Essays on endogenous formation of bilateral partnerships
Author: Tzanetaki, Charoula
ISNI:       0000 0004 7961 1209
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2017
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A constant theme in the endogenous network formation literature has been the tension between what is privately optimal for the agents who create a network, and what maximises social welfare. When the network structure affects, and is affected, by subsequent agent behaviour, it is also pertinent to ask whether the overall network and behaviour outcome can agree with society's interests. We explore these questions by critically reviewing seminal papers in the literature of static and dynamic network formation, highlighting negative results, and investigating the sources of inefficiencies. We then present two models featuring an endogenous partnership formation stage and a subsequent endogenous non-cooperative effort provision stage. In both models, effort provision actions feature strategic complementarity, and agents face a negative externality from the links of partners. Partnerships are non-exclusive and agents face either an indirect or a direct cost of effort provision. In the first model, agents are ex ante homogeneous, whereas in the second model agents have heterogeneous productivity. For various general families of production functions, we pinpoint the efficient linking and effort provision strategy profile and compare it with the set of stable networks. Even though in both models the game is one-shot and the agents are myopic, we prove that the efficient network structure and effort provision profile will always be sustained as an equilibrium of the overall game. For homogeneity, we directly contrast our positive results with the negative results of the Jackson and Wolinsky (1996) [31] Co-author model. We, moreover, prove that, for some families of production functions, the efficient network is the unique stable network. For heterogeneity, we additionally perform comparative statics in order to observe changes in relative specialisation to the high-type partnership, as the relative productivity ratio and the degree of concavity vary. Overall, modelling the interplay between link formation decisions and endogenous effort provision allows us to reach positive results where stability and efficiency are reconciled.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HB Economic Theory