A Competitive Partnership Formation Process

CentER Discussion Paper Series No. 2013-008

18 Pages Posted: 4 Feb 2013

See all articles by Tommy Andersson

Tommy Andersson

Lund University - Department of Economics

Jens Gudmundsson

University of Copenhagen - Department of Economics

Dolf Talman

Tilburg University - Department of Econometrics & Operations Research

Zaifu Yang

University of York - Department of Economics and Related Studies

Date Written: February 4, 2013

Abstract

A group of heterogenous agents may form partnerships in pairs. All single agents as well as all partnerships generate values. If two agents choose to cooperate, they need to specify how to split their joint value among one another. In equilibrium, which may or may not exist, no agents have incentives to break up or form new partnerships. This paper proposes a dynamic competitive adjustment process that always either finds an equilibrium or exclusively disproves the existence of any equilibrium in finitely many steps. When an equilibrium exists, partnership and revenue distribution will be automatically and endogenously determined by the process. Moreover, several fundamental properties of the equilibrium solution and the model are derived.

Keywords: partnership formation, adjustment process, equilibrium, assignment market

JEL Classification: C62, C72, D02

Suggested Citation

Andersson, Tommy and Gudmundsson, Jens and Talman, Dolf J. J. and Yang, Zaifu, A Competitive Partnership Formation Process (February 4, 2013). CentER Discussion Paper Series No. 2013-008, Available at SSRN: https://ssrn.com/abstract=2211446 or http://dx.doi.org/10.2139/ssrn.2211446

Tommy Andersson (Contact Author)

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

Jens Gudmundsson

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Dolf J. J. Talman

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands
+31 13 466 2346 (Phone)

Zaifu Yang

University of York - Department of Economics and Related Studies ( email )

Heslington
York, YO1 5DD
United Kingdom

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