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The Structure of Information Networks

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  • Sarangi, Sudipta

    (Louisiana State University)

  • Raj Kannan
  • Lydia Ray

Abstract

We develop a model of information acquisition in a network where agents pay for all the information they acquire including those through indirect links. The cost of information depends on the value of information itself and the distance it traverses in the network. We find that when the costs of information increase with distance, the complete network is the only Nash network. When costs of information decrease with distance capturing delay, all equilibrium information networks are minimally connected, though not all trees are Nash. We analyze the popular star and chain networks and identify strict Nash networks. We show that there is almost no divergence between efficient and equilibrium information networks. We explore the implications of a spatial model and information decay and discuss the relationship with experimental evidence.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 182.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:182

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Keywords: Nash networks; information networks; efficient networks;

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References

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  1. Andrea Galeotti & Sanjeev Goyal & Jurjen Kamphorst, 2003. "Network Formation with Heterogeneous Players," Economics Discussion Papers 562, University of Essex, Department of Economics.
  2. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
  3. Sarangi, Sudipta & Raj Kannan & Lydia Ray, 2003. "The Structure of Information Networks," Royal Economic Society Annual Conference 2003 182, Royal Economic Society.
  4. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  6. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  7. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA.
  8. Sudipta Sarangi & H. Haller, . "Nash Networks with Heterogeneous Agents," Departmental Working Papers 2003-06, Department of Economics, Louisiana State University.
  9. Michael Kosfeld, . "Network Experiments," IEW - Working Papers 152, Institute for Empirical Research in Economics - University of Zurich.
  10. Cary Deck & Cathleen Johnson, 2004. "Link bidding in laboratory networks," Review of Economic Design, Springer, vol. 8(4), pages 359-372, 04.
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Citations

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Cited by:
  1. Breitmoser, Yves & Vorjohann, Pauline, 2013. "Efficient structure of noisy communication networks," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 396-409.
  2. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA.
  3. Sarangi, Sudipta & Raj Kannan & Lydia Ray, 2003. "The Structure of Information Networks," Royal Economic Society Annual Conference 2003 182, Royal Economic Society.
  4. Filippo Vergara Caffarelli, 2009. "Networks with decreasing returns to linking," Temi di discussione (Economic working papers) 734, Bank of Italy, Economic Research and International Relations Area.

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