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original papers : Network formation models with costs for establishing links

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  • (*), Anne van den Nouweland
  • Marco Slikker

Abstract

In this paper we study endogenous formation of communication networks in situations where the economic possibilities of groups of players can be described by a cooperative game. We concentrate on the influence that the existence of costs for establishing communication links has on the communication networks that are formed. The starting points in this paper are two game-theoretic models of the formation of communication links that were studied in the literature fairly recently, the extensive-form model by Aumann and Myerson (1988) and the strategic-form model that was studied by Dutta et al. (1998). We follow their analyses as closely as possible and use an extension of the Myerson value to determine the payoffs to the players in communication situations when forming links is not costless. We find that it is possible that as the costs of establishing links increase, more links are formed.

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Bibliographic Info

Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 5 (2000)
Issue (Month): 3 ()
Pages: 333-362

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Handle: RePEc:spr:reecde:v:5:y:2000:i:3:p:333-362

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Cited by:
  1. Audy, Jean-François & D’Amours, Sophie & Rönnqvist, Mikael, 2012. "An empirical study on coalition formation and cost/savings allocation," International Journal of Production Economics, Elsevier, vol. 136(1), pages 13-27.
  2. MUTUSWAMI, Suresh & WINTER, Eyal, 2000. "Subscription mechanisms for network formation," CORE Discussion Papers 2000020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Paolo Pin, 2006. "Eight degrees of separation," Working Papers 2006_26, Department of Economics, University of Venice "Ca' Foscari".
  4. Matthew O. Jackson, 2003. "Allocation Rules for Network Games," Working Papers 1160, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Rodrigo Harrison, 2003. "Global Games with Strategic Substitutes," Working Papers gueconwpa~03-03-06, Georgetown University, Department of Economics.

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