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Communication networks with endogeneous link strength

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Author Info
Francis Bloch (Ecole Polytechnique, France)
Bhaskar Dutta () (University of Warwick, UK)

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Abstract

This paper analyzes the formation of networks when players choose how much to invest in each relationship. We suppose that players have a fixed endowment that they can allocate across links, and in the baseline model, suppose that link strength is an additively separable and convex function of individual investments, and that agents use the path which maximizes the product of link strengths. We show that both the stable and efficient network architectures are stars. However, the investments of the hub may differ in stable and efficient networks. Under alternative assumptions on the investment technology and the reliability measure, other network architectures can emerge as efficient and stable.

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Publisher Info
Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 08-15.

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Length: 32 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:ind:isipdp:08-15

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Related research
Keywords: communication networks; network reliability; endogenous link strength;

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Find related papers by JEL classification:
D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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. Bloch, Francis & Jackson, Matthew, 2004. "The Formation of Networks with Transfers among Players," Working Papers 1194, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
  2. Sanjeev Goyal, 2005. "Strong and Weak Links," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 608-616, 04/05. [Downloadable!] (restricted)
  3. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  4. Feri, Francesco, 2007. "Stochastic stability in networks with decay," Journal of Economic Theory, Elsevier, vol. 135(1), pages 442-457, July. [Downloadable!] (restricted)
  5. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June. [Downloadable!]
    Other versions:
  6. Gilles, R.P. & Sarangi, S., 2004. "Social network formation with consent," Discussion Paper 70, Tilburg University, Center for Economic Research. [Downloadable!]
  7. Bhaskar Dutta & Suresh Mutuswami, 1997. "Stable Networks," Tinbergen Institute Discussion Papers 97-039/1, Tinbergen Institute.
    Other versions:
  8. Goyal, Sanjeev & Moraga-Gonzalez, Jose Luis, 2001. "R&D Networks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 686-707, Winter.
    Other versions:
  9. Scott A. Boorman, 1975. "A Combinatorial Optimization Model for Transmission of Job Information through Contact Networks," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 216-249, Spring. [Downloadable!] (restricted)
  10. Jan K. Brueckner, 2004. "Friendship Networks," Econometric Society 2004 North American Winter Meetings 184, Econometric Society. [Downloadable!]
  11. Jacques Durieu & Hans Haller & Philippe Solal, 2004. "Nonspecific Networking," Game Theory and Information 0403005, EconWPA. [Downloadable!]
  12. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July. [Downloadable!] (restricted)
  13. Antonio Cabrales & Antoni Calvo-Armengol & Yves Zenou, 2007. "Effort and synergies in network formation," Economics Working Papers we072515, Universidad Carlos III, Departamento de Economía. [Downloadable!]
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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. Antonio Jimenez-Martinez, . "Strategic Information Acquisition in Networked Groups with "Informational Spillovers"," School of Economics Working Papers EC200801, Universidad de Guanajuato. [Downloadable!]
  2. Alejandro Tatsuo Moreno, . "Group Fairness and Game Theory," School of Economics Working Papers EC200702, Universidad de Guanajuato. [Downloadable!]
  3. Antonio Cabrales & Antoni Calvó-Armengol & Yves Zenou, 2009. "Social Interactions and Spillovers: Incentives,Segregation and Topology," Working Papers 2009-06, FEDEA. [Downloadable!]
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