Network Formation Under Heterogeneous Costs: The Multiple Group Model
AbstractIt is widely recognized that the shape of networks influences both individual and aggregate behavior. This raises the question which types of networks are likely to arise. In this paper we investigate a model of network formation, where players are divided into groups and the costs of a link between any pair of players are increasing in the distance between the groups that these players belong to. We give a full characterization of the networks induced by a minimal curb set for any number of groups. To do so, we show that in our multiple group model each minimal curb set is a so-called super-tight curb set, that is a minimal curb set satisfying the condition that in each state of the set every player has the same best reply. From the proof it follows that every recurrent class of an unperturbed best reply dynamics is a minimal (super-tight) curb set and reversely, which yields the characterization result. We show that in case of multiple groups networks in minimal curb sets may have features that can not occur in networks with at most two groups. Nevertheless, local centrality and center-sponsorship are still important characteristics of the networks in minimal curb sets.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.
Volume (Year): 09 (2007)
Issue (Month): 04 ()
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Web page: http://www.worldscinet.com/igtr/igtr.shtml
Other versions of this item:
- Jurjen Kamphorst & Gerard van der Laan, 2004. "Network Formation under Heterogeneous Costs: The Multiple Group Model," Tinbergen Institute Discussion Papers 04-006/1, Tinbergen Institute.
- B4 - Schools of Economic Thought and Methodology - - Economic Methodology
- C0 - Mathematical and Quantitative Methods - - General
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
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- K.J.M. De Jaegher & J.J.A. Kamphorst, 2009.
"Two-way flow networks with small decay,"
09-34, Utrecht School of Economics.
- K.J.M. De Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
- K. De Jaegher & J.J.A. Kamphorst, 2010. "Two-way Flow Networks with Small Decay," Tinbergen Institute Discussion Papers 10-125/1, Tinbergen Institute.
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