Building Social Networks
AbstractWe examine the process of building social relationships as a non-cooperative game that requires mutual consent and involves reaching out to others at a cost. Players create their social network from amongst their set of acquaintances. Having acquaintances allows players to form naive beliefs about the feasibility of building direct relationships with their acquaintances. These myopic beliefs describe how the other players are expected to respond to the initiation of a link by a player. We introduce a stability concept called "monadic stability" where agents play a best response to their formed myopic beliefs such that these beliefs are self-confirming. The resulting equilibrium networks form subset of the set of pairwise stable networks.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 642.
Length: 28 p.
Date of creation: 2006
Date of revision:
Social networks; network formation; pairwise stability; trust; self-confirming equilibrium;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-GTH-2006-11-18 (Game Theory)
- NEP-NET-2006-11-18 (Network Economics)
- NEP-SOC-2006-11-18 (Social Norms & Social Capital)
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