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The structure of information networks

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Author Info

  • Rajgopal Kannan

    ()

  • Lydia Ray

    ()

  • Sudipta Sarangi

    ()

Abstract

We develop a model of information acquisition in a network where agents pay for all the information they acquire including those through indirect links. The cost of information depends on the value of information itself and the distance it traverses in the network. We find that when the costs of information increase with distance, the complete network is the only Nash network. When costs of information decrease with distance capturing delay, all equilibrium information networks are minimally connected, though not all trees are Nash. We analyze the popular star and chain networks and identify strict Nash networks. We show that there is almost no divergence between efficient and equilibrium information networks. We explore the implications of a spatial model and information decay and discuss the relationship with experimental evidence.

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File URL: http://hdl.handle.net/10.1007/s00199-005-0046-6
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 30 (2007)
Issue (Month): 1 (January)
Pages: 119-134

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Handle: RePEc:spr:joecth:v:30:y:2007:i:1:p:119-134

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Related research

Keywords: Information networks; Nash networks; Efficient networks; C72; D85;

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References

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  1. Andrea Galeotti & Sanjeev Goyal, 2002. "Network Formation with Heterogeneous Players," Tinbergen Institute Discussion Papers 02-069/1, Tinbergen Institute.
  2. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  3. Sarangi, Sudipta & Raj Kannan & Lydia Ray, 2003. "The Structure of Information Networks," Royal Economic Society Annual Conference 2003 182, Royal Economic Society.
  4. Michael Kosfeld, . "Network Experiments," IEW - Working Papers 152, Institute for Empirical Research in Economics - University of Zurich.
  5. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  6. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA.
  7. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
  8. Hans Haller & Sudipta Sarangi, 2003. "Nash Networks with Heterogeneous Agents," Discussion Papers of DIW Berlin 337, DIW Berlin, German Institute for Economic Research.
  9. Cary Deck & Cathleen Johnson, 2004. "Link bidding in laboratory networks," Review of Economic Design, Springer, vol. 8(4), pages 359-372, 04.
  10. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
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Citations

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Cited by:
  1. Sudipta Sarangi & Rajgopal Kannan & Lydia Ray, . "The Structure of Information Networks," Departmental Working Papers 2004-05, Department of Economics, Louisiana State University.
  2. Matthew O. Jackson, 2003. "A survey of models of network formation: Stability and efficiency," Working Papers 1161, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Breitmoser, Yves & Vorjohann, Pauline, 2012. "Efficient structure of noisy communication networks," MPRA Paper 42862, University Library of Munich, Germany.
  4. Filippo Vergara Caffarelli, 2009. "Networks with decreasing returns to linking," Temi di discussione (Economic working papers) 734, Bank of Italy, Economic Research and International Relations Area.

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