DeFIPP seminar | Hold-up and Information Asymmetry in Relational Networks: on the Optimal Sharing Rule with Local Partners

With Stefano Bolatto and Simone Righi. The paper outlines a model with sufficiently general structure in which a principal (the outsider) must resort to a network intermediary (an insider) to reach out a third entity (the target), thereby creating some economic value.

We study how different features of the local relational network drive the outsider's choice  of the sharing rule according to which the joint surplus from the relationship with the insider is split. Two problems affect this choice. First, a standard hold-up inefficiency may arise when interpersonal linkages are qualitatively different and their cost of activation is upon the insider only. Second, the outsider typically suffers of an information asymmetry, insofar  as the partner's position in the local network is private information. We characterize sufficient conditions for the emergence of such problems and we investigate their interplay. We also provide analytical and numerical calculations of the optimal sharing rule as a function of the relational network's characteristics.

Contact : Christian Kiedaisch - christian.kiedaisch@unamur.be
Plus d'info : https://defipp.unamur.be/seminars/2020-2021
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