A dynamic network game of the fintech industry

Abstract

Economies of scale, economies of scope, and technology spillover are decisive economic elements that are crucial to the development in the Fintech industry. These positive externalities are often realized through network links. In this paper, we present a dynamic network of financial firms which exhibits these decisive elements. The network game equilibria are characterized. A Pareto efficient solution involving collaboration of all firms is provided. To obtain a fair-share distribution of cooperative gains, the Shapley value is adopted as the sharing mechanism. Payoff distribution mechanisms which guarantee the fulfilment of the Shapley value distribution in each stage of the cooperation duration are derived.