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Strategic analysis in complex networks with local externalities

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Author Info

  • Galeotti, Andrea
  • Vega-Redondo, Fernando

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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Bibliographic 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
Phone: 626 395-4065
Fax: 626 405-9841
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Web page: http://www.hss.caltech.edu/ss

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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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Cited by:
  1. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 218-244.
  2. Kets, W., 2007. "Convergence of Beliefs in Bayesian Network Games," Discussion Paper 2007-98, Tilburg University, Center for Economic Research.

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