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Strategic analysis in complex networks with local externalities

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Author Info
Galeotti, Andrea
Vega-Redondo, Fernando

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Abstract

In this paper, we discuss a model with local positive externalities on a complex random network that allows for wide heterogeneities among the agents. The situation can be analyzed as a game of incomplete information where each player's connectivity is her type. We focus on three paradigmatic cases in which the overall degree distribution is Poisson, exponential, and scale-free (given by a power law). For each of them, we characterize the equilibria and obtain interesting insights on the interplay between network topology and payoffs. For example, we reach the somewhat paradoxical conclusion that a broad degree distribution or/and too low a cost of effort render it difficult, if not impossible, to sustain an (efficient) high-effort configuration at equilibrium.

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Publisher Info
Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1224.

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Length: 24 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:clt:sswopa:1224

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Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
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Related research
Keywords: Complex networks; local externalities;

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References listed on IDEAS
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    Other versions:
  5. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May. [Downloadable!] (restricted)
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  6. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215.
  7. Antoni Calvó-Armengol & Yves Zenou, 2004. "Social Networks And Crime Decisions: The Role Of Social Structure In Facilitating Delinquent Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 939-958, 08. [Downloadable!] (restricted)
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  8. Sanjeev Goyal & José Luis Moraga, 2000. "R&D Networks," Tinbergen Institute Discussion Papers 00-075/1, Tinbergen Institute. [Downloadable!]
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    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Conley, Timothy & Udry, Christopher, 2001. " Social Learning through Networks: The Adoption of New Agricultural Technologies in Ghana," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(3), pages 668-73, August. [Downloadable!] (restricted)
  12. Andrea Galeotti, 2004. "Consumers Networks and Search Equilibria," Tinbergen Institute Discussion Papers 04-075/1, Tinbergen Institute. [Downloadable!]
  13. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October. [Downloadable!] (restricted)
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  1. repec:bep:theadv:v:7:y:2007:i:1:p:1341-1341 is not listed on IDEAS
  2. Kets, W., 2007. "Convergence of Beliefs in Bayesian Network Games," Discussion Paper 2007-98, Tilburg University, Center for Economic Research. [Downloadable!]
  3. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2008. "Network Games," Economics Working Papers ECO2008/07, European University Institute. [Downloadable!]
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