Externalities in endogenous sharing economy networks

Abstract

This paper investigates the impact of link formation between a pair of agents on the resource availability of other agents (that is, externalities) in a social cloud network, a special case of endogenous sharing economy networks. Specifically, we study how the closeness between agents and the network size affect externalities.We conjecture, and experimentally support, that for an agent to experience positive externalities, an increase in its closeness is necessary. The condition is not sufficient though. We, then, show that for populated ring networks, one or more agents experience positive externalities due to an increase in the closeness of agents. Further, the initial distance between agents forming a link has a direct bearing on the number of beneficiaries, and the number of beneficiaries is always less than that of non-beneficiaries.

Resource availability in the social cloud: An economics perspective

“…The studies (Mane et al, 2020b(Mane et al, , 2019Mane et al, 2014;Mane et al, 2020a;Moscibroda et al, 2011) focus on endogenous social connections in terms of resource-sharing network formation. Mane et al (2020b) study social cloud formation in a strategic setting.…”

“…Mane et al (2019) provide a necessary and sufficient condition under which an agent experiences positive or negative spillover effect. Mane et al (2020a) follow an empirical approach to study the role of network structure and size in determining spillover. 2 In this paper, we throw attention on the role of agents' closeness in determining the kind of spillover effects they experience due to a newly added link in the network.…”