On Hierarchies and Communication

This discussion paper resulted in a publication in 'Social Choice and Welfare', 2012, 39, 721-735. <P> Many economic organizations have some relational structure, meaning that economic agents do not only differ with respect to certain individual characteristics such as wealth and preferences, but also belong to some relational structure in which they usually take different positions. Two examples of such structures are communication networks and hierarchies. In the literature the distinction between these two types of relational structures is not always clear. In models of restricted cooperation this distinction should be defined by properties of the set of feasible coalitions. We characterize the feasible sets in communication networks and compare them with feasible sets arising from hierarchies.