Inequality and network structure

Willemien Kets*, Garud Iyengar, Rajiv Sethi, Samuel Bowles

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Scopus citations

Abstract

We explore the manner in which the structure of a social network constrains the level of inequality that can be sustained among its members, based on the following considerations: (i) any distribution of value must be stable with respect to coalitional deviations, and (ii) the network structure itself determines the coalitions that may form. We show that if players can jointly deviate only if they form a clique in the network, then the degree of inequality that can be sustained depends on the cardinality of the maximum independent set. For bipartite networks, the size of the maximum independent set fully characterizes the degree of inequality that can be sustained. This result extends partially to general networks and to the case in which a group of players can deviate jointly if they are all sufficiently close to each other in the network.

Original languageEnglish (US)
Pages (from-to)215-226
Number of pages12
JournalGames and Economic Behavior
Volume73
Issue number1
DOIs
StatePublished - Sep 2011

Keywords

  • Cooperative games
  • Inequality
  • Lorenz dominance
  • Networks

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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