Network Structures

Suppose a network exchange theory experiment is run on the following graph

using the one-exchange rule with $10 placed on each edge.

(a) Say which node or nodes you would expect to receive the most favorable exchanges, and give an explanation for your answer.

(HINT: You may propose a balanced outcome. It reflects the relative power between players.)

(b) Now the experimenters vary the conditions slightly: instead of placing $10 on the b-c edge, they place only $2. Otherwise, the experiment is run exactly as before. Explain what you think will happen to the relative power of each of the participants, compared to the situation in (a)

(HINT: This appears to be a dramatic change: the power of nodes b and c is gone. But maybe not? There is a modes amount of $2 to split as a last resort. The question to ask here is: do b and c have positive outside options? You may argue about this in quantitative terms and then propose an outcome.)