Collective action in networks: communication, cooperation and redistribution
Abstract
A person's friends, neighbours and other social relationships can
have a large impact on their economic outcomes. We examine three
important ways that networks can affect people's lives: when networks
describe who they communicate with, who they can trust, and who
benefits from their public good provision. We analyse information
transmission in networks in a new, intuitive way which removes the
problematic redundancy of double counting the signals that travel
through more than one walk between nodes. Two-connectedness and
cycles of length four play an important role in whether players are
`visible', which means that other players can communicate about
them.
Next, using this approach to network communication, we investigate
cooperation and punishment in a society where information flows
about cheating are determined by an arbitrary fixed network. We
identify which players can trust and cooperate with each other in a
repeated game where members of a community are randomly matched
in pairs. Our model shows how two aspects of trust depend on players'
network position: they are `trusting' if they are more likely to receive
information about other players' types; and they are `trusted' if others
can communicate about them, giving them strong incentives not to
deviate.
Lastly, in networks with private provision of public goods, we show
that a `neutral' policy corresponds to a switch in the direction of
the impact of income redistribution. Where redistribution is non-
neutral, we can identify the welfare effects of transfers, including
whether or not Pareto-improving transfers are possible. If not, we
find the implicit welfare weights of the original equilibrium. In this
setting, we also identify a transfer paradox, where, counter-intuitively,
a transfer of wealth between economic agents can result in the giver
being better off at the new Nash equilibrium, while the recipient is
worse off .
Authors
King, MaiaCollections
- Theses [4235]