Networks in markets that unravel, and those that don't: Itay Fainmesser

Itay Fainmesser defended his dissertation yesterday.

One of the papers in his dissertation concerns job markets that have “unraveled” so that a large part of the market consists of early, exploding offers. He develops a network model, motivated by the observation that when many markets unravel (as when medical labor markets start to hire doctors well over a year before they begin employment), hiring also becomes more local (as hospitals start to hire students from local medical schools, etc.). Itay takes this as evidence that when hiring is very early, employers are forced to rely more on their local networks for information. He builds a network model that allows him to investigate which properties of local networks lead to unraveling, and which lead to later hiring. In this model, information about the quality of candidates eventually becomes widely available, but early information about candidate quality can only be reliably transmitted along links of a network. (When Markets Unravel: Social Networks, Information Transmission, and the 'Hiring Frenzy' older version here.)

Another of his papers tackles the question of cooperation in repeated games, where the possible interactions are constrained by a network, and he asks which buyer-seller network structures will support persistent cooperation (where sellers have an opportunity to cooperate by shipping a high quality good, or to defect by shipping a low quality good). It’s a hard problem, and (in a third paper) he and a coauthor invent models and tools to deal with it (in a large-network framework), that allow him to turn some difficult non-monotonic relationships among networks into well behaved statements about the value of links. (Community Structure and Market Outcomes: Towards a Theory of Repeated Games in Networks )

Itay will be an assistant professor of economics at Brown next year.

Welcome to the club, Itay.