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Non-Cooperative Network Formation with Network Maintenance Costs

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Author Info
Filippo VERGARA CAFFARELLI

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Abstract

This paper presents a model of non-cooperative network formation similar to Bala and Goyal (2000), except that marginal costs in the size of the network is increasing. Agents link among each other to gain information and update their links according to a better reply dynamics. In the long run the system settles in a state that consists of starred-wheel networks. This is reminiscent of some real world features. Collections of smaller disjoint networks connecting few agents are more common than global networks connecting all agents of the community. Di.erences within a connected component such as core and periphery are established.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2004/18.

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Date of creation: 2004
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Handle: RePEc:eui:euiwps:eco2004/18

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Related research
Keywords: Networks; Coordination; Learning dynamics; Non-cooperative games;

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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References listed on IDEAS
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. Marianne Bertrand & Erzo F. P. Luttmer & Sendhil Mullainathan, 2000. "Network Effects And Welfare Cultures," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 1019-1055, August. [Downloadable!] (restricted)
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  3. Slikker, Marco & Dutta, Bhaskar & van den Nouweland, Anne & Tijs, Stef, 2000. "Potential maximizers and network formation," Mathematical Social Sciences, Elsevier, vol. 39(1), pages 55-70, January. [Downloadable!] (restricted)
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  4. Sanjeev Goyal & Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Tinbergen Institute Discussion Papers 00-092/1, Tinbergen Institute. [Downloadable!]
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  5. Ichino, Andrea & Maggi, Giovanni, 2000. "Work Environment And Individual Background: Explaining Regional Shirking Differentials In A Large Italian Firm," CEPR Discussion Papers 2387, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society. [Downloadable!]
  7. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
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  9. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September. [Downloadable!] (restricted)
  10. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October. [Downloadable!] (restricted)
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  11. Jackson, Matthew O. & Watts, Alison, 2002. "On the formation of interaction networks in social coordination games," Games and Economic Behavior, Elsevier, vol. 41(2), pages 265-291, November. [Downloadable!] (restricted)
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  12. 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!]
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  15. 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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  16. S. Goyal & J.L. Moraga, 2000. "R&D Networks," Econometric Institute Report 202, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
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  17. Juan Larrosa & Fernando Tohme, 2003. "Network Formation with Heterogenous Agents," Microeconomics 0301002, EconWPA. [Downloadable!]
  18. Falk, Armin & Kosfeld, Michael, 2003. "It's All About Connections: Evidence on Network Formation," CEPR Discussion Papers 3970, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  19. Dutta, B. & Nouweland, A. van den & Tijs, S., 1995. "Link Formation in Cooperative Situations," Discussion Paper 35, Tilburg University, Center for Economic Research. [Downloadable!]
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  20. Anne C. Case & Lawrence F. Katz, 1991. "The Company You Keep: The Effects of Family and Neighborhood on Disad- vantaged Youths," NBER Working Papers 3705, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  21. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February. [Downloadable!] (restricted)
  22. Goyal, S. & Joshi, S., 2000. "Networks of Collaboration in Oligopoly," Econometric Institute Report EI 9952-/A Revision_Date:, Erasmus University Rotterdam, Econometric Institute. [Downloadable!]
  23. 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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  24. Leigh Tesfatsion, 2000. "Hysteresis in an Evolutionary Labor Market with Adaptive Search," Computational Economics 0004003, EconWPA. [Downloadable!]
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  25. Sanjeev Goyal & Fernando Vega-Redondo, 2003. "Network Formation and Social Coordination," Working Papers 481, Queen Mary, University of London, Department of Economics. [Downloadable!]
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Full references

Cited by:
(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. D'Ignazio, A. & Giovannetti, E., 2004. "From Exogenous to Endogenous Networks: Internet Applications," Cambridge Working Papers in Economics 0445, Faculty of Economics, University of Cambridge. [Downloadable!]
  2. Kris De Jaegher & Jurjen Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics. [Downloadable!]
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