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Inefficiencies in a model of spatial networks formation with positive externalities

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  • Carayol, Nicolas
  • Roux, Pascale
  • YIldIzoGlu, Murat

Abstract

In this paper, we make an exploratory use of computational techniques (genetic algorithms and Monte Carlo simulations) to compute efficient and emergent networks in a spatialized version of the connections model of Jackson and Wolinski [Jackson, M.O., Wolinski, A., 1996. A strategic model of social and economic networks. Journal of Economic Theory 71, 44-74]. This approach allows us to observe and discuss inefficiencies that arise in a strategic network formation context with imperfectly link-mediated positive externalities to connections and spatial link costs. Our results highlight that, depending on the strength of the externalities, emergent and efficient networks may share several structural properties. Nevertheless, emergent networks are insufficiently dense and should be more structured around central agents.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 67 (2008)
Issue (Month): 2 (August)
Pages: 495-511

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Handle: RePEc:eee:jeborg:v:67:y:2008:i:2:p:495-511

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References

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  1. Tesfatsion, Leigh, 1997. "A Trade Network Game with Endogenous Partner Selection," Staff General Research Papers 1680, Iowa State University, Department of Economics.
  2. Jackson, Matthew O. & Rogers, Brian W., 2005. "The economics of small worlds," Working Papers 1214, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Vega-Redondo, Fernando, 2006. "Building up social capital in a changing world," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 2305-2338, November.
  4. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Kirman, Alan P. & Vriend, Nicolaas J., 2001. "Evolving market structure: An ACE model of price dispersion and loyalty," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 459-502, March.
  6. Matthew O. Jackson & Francis Bloch, 2004. "The Formation of Networks with Transfers among Players," Working Papers 2004.80, Fondazione Eni Enrico Mattei.
  7. Robert P. Gilles & Cathleen Johnson, 2000. "original papers : Spatial social networks," Review of Economic Design, Springer, vol. 5(3), pages 273-299.
  8. Olivier DUPOUËT (BETA UMR CNRS 7522) & Murat YILDIZOGLU (IFReDE-E3i), 2003. "Organizational performance in hierarchies and communities of practice," Cahiers du GRES 2003-06, Groupement de Recherches Economiques et Sociales.
  9. Nicolas Carayol & Pascale Roux, 2004. "Behavioral Foundations And Equilibrium Notions For Social Network Formation Processes," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 77-92.
  10. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  11. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  12. Robles, Jack, 1998. "Evolution with Changing Mutation Rates," Journal of Economic Theory, Elsevier, vol. 79(2), pages 207-223, April.
  13. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March.
  14. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
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Cited by:
  1. König, Michael D. & Battiston, S. & Napoletano, M. & Schweitzer, F., 2011. "Recombinant knowledge and the evolution of innovation networks," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 145-164, August.
  2. Backman, Mikaela & Karlsson, Charlie, 2014. "Determinants of self-employment among commuters and non-commuters," Working Paper Series in Economics and Institutions of Innovation 365, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  3. repec:spo:wpecon:info:hdl:2441/7346 is not listed on IDEAS
  4. G. Fagiolo & A. Roventini., 2009. "On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
  5. Nicolas Carayol (ADIS, BETA) & Pascale Roux (ADIS, BETA) & Murat Yildizoglu (GREThA), 2007. "In search of efficient network structures: The needle in the haystack," Cahiers du GREThA 2007-11, Groupe de Recherche en Economie Théorique et Appliquée.
  6. Mauro Napoletano & Stefano Battiston & Michael D König & Frank Schweitzer, 2008. "The Efficiency and Evolution of R&D Networks," Sciences Po publications 08/95, Sciences Po.
  7. Stefania Vitali & Stefano Battiston & Mauro Gallegati, . "Financial fragility and distress propagation in a network of regions," Working Papers ETH-RC-12-016, ETH Zurich, Chair of Systems Design.
  8. repec:spo:wpecon:info:hdl:2441/9935 is not listed on IDEAS

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