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  • Haller, Hans
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    Abstract

    In a model of strategic network formation, the endogenously formed network is built around a pre-existing network. We envisage that the pre-existing or core network is publicly provided. Strategic network formation is decentralized: Players act in their private interest and bear the costs when adding links to the pre-existing network. We study how the pre-existing network affects existence of Nash equilibria and efficiency of Nash equilibrium outcomes: It can foster or prohibit existence of Nash equilibria. It can improve or worsen equilibrium welfare. Special attention is paid to an insider–outsider model where society is partitioned into several groups and links within a group (between insiders) are much cheaper than links across groups (between outsiders). We also present equilibrium existence results and examine the effect of Pareto optimal publicly provided networks.

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    Bibliographic Info

    Article provided by Elsevier in its journal Mathematical Social Sciences.

    Volume (Year): 64 (2012)
    Issue (Month): 2 ()
    Pages: 166-172

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    Handle: RePEc:eee:matsoc:v:64:y:2012:i:2:p:166-172

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    Web page: http://www.elsevier.com/locate/inca/505565

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    References

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    1. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
    2. Haller, Hans & Sarangi, Sudipta, 2005. "Nash networks with heterogeneous links," Mathematical Social Sciences, Elsevier, vol. 50(2), pages 181-201, September.
    3. Pascal Billand & Christophe Bravard & Sudipta Sarangi, 2008. "Existence of Nash networks in one-way flow models," Economic Theory, Springer, vol. 37(3), pages 491-507, December.
    4. Sudipta Sarangi & Hans Haller & Jurjen Kamphorst, . "(Non-)Existence and Scope of Nash Networks," Departmental Working Papers 2005-14, Department of Economics, Louisiana State University.
    5. Andrea Galeotti, 2004. "One-way Flow Networks: the Role of Heterogeneity," Tinbergen Institute Discussion Papers 04-031/1, Tinbergen Institute.
    6. Jean Derks & Martijn Tennekes, 2009. "A note on the existence of Nash networks in one-way flow models," Economic Theory, Springer, vol. 41(3), pages 515-522, December.
    7. Venkatesh Bala & Sanjeev Goyal, 2000. "original papers : A strategic analysis of network reliability," Review of Economic Design, Springer, vol. 5(3), pages 205-228.
    8. Pascal Billand & Christophe Bravard & Sudipta Sarangi, 2010. "The Insider-Outsider Model Reexamined," Games, MDPI, Open Access Journal, vol. 1(4), pages 422-437, October.
    9. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
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    Cited by:
    1. Philipp Möhlmeier & Agnieszka Rusinowska & Emily Tanimura, 2013. "A degree-distance-based connections model with negative and positive externalities," Working Papers 479, Bielefeld University, Center for Mathematical Economics.

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