A General Equilibrium of Managed Services

Abstract

A service is a value-creating interaction between individuals, each in the role of either a performer or a receiver. A service is represented by a network on the set of individuals. There are many service networks possible, which all belong to the service network possibility set. The service structure consists of this set and a value function on the service networks. Specialization of individuals leads to separating the performer interaction from the receiver interaction in the service structure. The service concept is thus extended to a stratified service with interactive groups on each level, represented by two hierarchical graphs. The main idea behind this paper is that services cannot be rendered unless they are managed. So a governance structure is introduced with agents who obey specific rules of management. There are two types of agents, managers - both for a performers organization and for a receivers organization - and consumers. An equilibrium for an economy with managed stratified services is defined and shown to exist for a market economy with rather strong conditions on both the service structure and the governance structure. It is shown to be a generalization of a neoclassical general equilibrium.

This paper is part of a long-term research project Competition and Cooperation launched in 1980 by the MathEcon groups of the UvA and the VU at Amsterdam, the UM in Maastricht and the KUB in Tilburg. I want to thank Renè van den Brink and Rob Gilles, my closest companions in developing the ideas introduced here. I also thank Dave Furth and the referee o this paper for valuable comments.