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Network Design under Local Complementarities

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  • Mohamed Belhaj

    ()
    (Centrale Marseille, (Aix-Marseille School of Economics), CNRS and EHESS)

  • Sebastian Bervoets

    ()
    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS)

  • Frédéric Deroïan

    ()
    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS)

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    Abstract

    We consider agents playing a linear network game with strategic complementarities. We analyse the problem of a policy maker who can change the structure of the network in order to increase the aggregate efforts of the individuals and/or the sum of their utilities, given that the number of links of the network has to remain fixed. We identify some link reallocations that guarantee an improvement of aggregate efforts and/or aggregate utilities. With this comparative statics exercise, we then prove that the networks maximising both aggregate outcomes (efforts and utilities) belong to the class of Nested-Split Graphs.

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    Bibliographic Info

    Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1309.

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    Length: 39 pages
    Date of creation: 12 Feb 2013
    Date of revision: 12 Feb 2013
    Handle: RePEc:aim:wpaimx:1309

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    Web page: http://www.amse-aixmarseille.fr/en
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    Related research

    Keywords: Network; Linear Interaction; Bonacich Centralities; Strategic Complementarity; Nested Split Graphs.;

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    1. Andrea Galeotti & Sanjeev Goyal, 2007. "The Law of the Few," Economics Discussion Papers 636, University of Essex, Department of Economics.
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    9. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    10. Calvó-Armengol, Antoni & Zenou, Yves, 2003. "Social Networks and Crime Decisions: The Role of Social Structure in Facilitating Delinquent Behavior," Working Paper Series 601, Research Institute of Industrial Economics.
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