A noncooperative model of network formation with decreasing productivity
AbstractThis paper develops a model of noncooperative network formation. Link formation is two-sided. Information ﬂow is two-way. The paper is based on Bala and Goyal (2000) with the following difference in assumption: the value of information decays as it ﬂows through each agent, and the decay is increasing and concave in the number of his links. Thus, an agent may choose to avoid accessing an agent who possess many links since he is aware of the decay incurred through this agent. This avoidance leads to two particular results in the analysis of Nash networks: (1) Nash networks are not always connected; (2) Nash networks do not exist under some parameters. Since disconnectedness is reminiscent of a common feature of real-world network, the model may explain why real-world networks may exhibit this feature even when there is no heterogeneity among agents. Discussion on this insight is provided.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36570.
Date of creation: 10 Feb 2012
Date of revision:
Social Networks; Game Theory; Network Formation;
Find related papers by JEL classification:
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-GTH-2012-03-08 (Game Theory)
- NEP-NET-2012-03-08 (Network Economics)
- NEP-SOC-2012-03-08 (Social Norms & Social Capital)
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.:
- K.J.M. De Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
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