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The Role of Trust in Costly Network Formation

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Author Info
Sudipta Sarangi
Robert P. Gilles

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Abstract

We investigate game theoretic models of entwork formation that are based on individual actions only. Our approach is grounded in three simple and realistic principles. (1) Link formation should be a binary process of consent. (2) Link formation should be costly. (3) The class of network payoff functions should be as general as possible. We provide charecterizations of stable networks under the hypothesis of mutual consent for the case of two-sided and one-sided link formation costs. Furthermore, we introduce a new eqilibrium concept based on a limited, realistic form of farsightedness or (myopic) ''trust'' in network formation. We provide comparisons of the resulting networks with networks satisfying well known stability concepts developed in the literature

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 483.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:483

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Related research
Keywords: Social networks; individual stability; pairwsie stability; trust;

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Find related papers by JEL classification:
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sergio Currarini & Massimo Morelli, 2000. "Network Formation with Sequential Demands," Royal Holloway, University of London: Discussion Papers in Economics 99/2, Department of Economics, Royal Holloway University of London, revised Feb 2000. [Downloadable!]
  2. Matthew O. Jackson & Anne van den Nouweland, 2002. "Strongly Stable Networks," Microeconomics 0211006, EconWPA. [Downloadable!]
    Other versions:
  3. Michael McBride, 2003. "Position-Specific Informtion in Social Networks," Levine's Bibliography 506439000000000265, UCLA Department of Economics. [Downloadable!]
  4. Frank H. Page Jr. & Myrna H. Wooders & Samir Kamat, 2002. "Networks and Farsighted Stability," Computing in Economics and Finance 2002 370, Society for Computational Economics.
    Other versions:
  5. Ui, Takashi, 2000. "A Shapley Value Representation of Potential Games," Games and Economic Behavior, Elsevier, vol. 31(1), pages 121-135, April. [Downloadable!] (restricted)
  6. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  7. Matthew O. Jackson, 2003. "Allocation Rules for Network Games," Working Papers 1160, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  8. Slikker, M. & Nouweland, A. van den, 1999. "Network formation models with costs for establishing links," Research Memorandum 771, Tilburg University, Faculty of Economics and Business Administration. [Downloadable!]
  9. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA. [Downloadable!]
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  10. Rod Garratt & Cheng-Zhong Qin, 2003. "On cooperation structures resulting from simultaneous proposals," Economics Bulletin, Economics Bulletin, vol. 3(5), pages 1-9. [Downloadable!]
  11. Bhaskar Dutta & Suresh Mutuswami, 1997. "Stable Networks," Tinbergen Institute Discussion Papers 97-039/1, Tinbergen Institute.
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  12. Stef Tijs & Anne van den Nouweland & Bhaskar Dutta, 1998. "Link formation in cooperative situations," International Journal of Game Theory, Springer, vol. 27(2), pages 245-256. [Downloadable!] (restricted)
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  13. Hans Haller & Sudipta Sarangi, 2003. "Nash Networks with Heterogeneous Agents," Discussion Papers of DIW Berlin 337, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  14. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February. [Downloadable!] (restricted)
  15. Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May. [Downloadable!] (restricted)
  16. Slikker, Marco & van den Nouweland, Anne, 2001. "A One-Stage Model of Link Formation and Payoff Division," Games and Economic Behavior, Elsevier, vol. 34(1), pages 153-175, January. [Downloadable!] (restricted)
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  17. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October. [Downloadable!] (restricted)
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  18. Hart, Sergiu & Mas-Colell, Andreu, 1989. "Potential, Value, and Consistency," Econometrica, Econometric Society, vol. 57(3), pages 589-614, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marco A. Marini, 2007. "An Overview of Coalitions and Networks Formation Models for Economic Applications," Working Papers 0707, CREI Università degli Studi Roma Tre, revised 2007. [Downloadable!]
  2. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer, vol. 34(3), pages 305-318, October. [Downloadable!] (restricted)
  3. Gönül Dogan & M.A.L.M. van Assen & Arnout van de Rijt & Vincent Buskens, 2007. "The Stability of Exchange Networks," Working Papers 2007.66, Fondazione Eni Enrico Mattei. [Downloadable!]
  4. Gilles, R.P. & Chakrabarti, S. & Sarangi, S. & Badasyan, N., 2004. "The role of middlemen in efficient and strongly pairwise stable networks," Discussion Paper 64, Tilburg University, Center for Economic Research. [Downloadable!]
  5. Marco Marini, 2007. "An Overview of Coalition & Network Formation Models for Economic Applications," Working Papers 0712, University of Urbino Carlo Bo, Department of Economics, revised 2007. [Downloadable!]
  6. Sudipta Sarangi & H. Haller, . "Nash Networks with Heterogeneous Agents," Departmental Working Papers 2003-06, Department of Economics, Louisiana State University. [Downloadable!]
    Other versions:
  7. Matthew O. Jackson, 2003. "A survey of models of network formation: Stability and efficiency," Working Papers 1161, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
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