Strategic Interaction and Networks
AbstractGeography and social links shape economic interactions. In industries, schools, and markets, the entire network determines outcomes. This paper analyzes a large class of games and obtains a striking result. Equilibria depend on a single network measure: the lowest eigenvalue. This paper is the first to uncover the importance of the lowest eigenvalue to economic and social outcomes. It captures how much the network amplifies agents' actions. The paper combines new tools?potential games, optimization, and spectral graph theory?to solve for all Nash and stable equilibria and applies the results to R&D, crime, and the econometrics of peer effects.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 104 (2014)
Issue (Month): 3 (March)
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
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