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A noncooperative model of contest network formation

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  • Kenan Huremović

Abstract

In this paper we study a model of weighted network formation. The bilateral interaction is modeled as a Tullock contest game with the possibility of a draw. We describe stable networks under different concepts of stability. We show that a Nash stable network is either the empty network or the complete network. The complete network is not immune to bilateral deviations. When we allow for limited farsightedness, a stable network immune to bilateral deviations must be a complete M‐partite network, with partitions of different sizes. We provide several comparative statics results illustrating the importance of the structure of stable networks in mediating the effects of shocks and interventions. In particular, we show that an increase in the likelihood of a draw has a nonmonotonic effect on the level of wasteful contest spending in the society. To the best of our knowledge, this paper is the first attempt to model weighted network formation when the actions of individuals are neither strategic complements nor strategic substitutes.

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  • Kenan Huremović, 2021. "A noncooperative model of contest network formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(2), pages 275-317, April.
    • Handle: RePEc:bla:jpbect:v:23:y:2021:i:2:p:275-317
    DOI: 10.1111/jpet.12475
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    2. Zenou, Yves & Xu, Jin & Zhou, Junjie, 2019. "Networks in Conflict: A Variational Inequality Approach," CEPR Discussion Papers 13647, C.E.P.R. Discussion Papers.
    3. Xu, Jin & Zenou, Yves & Zhou, Junjie, 2022. "Equilibrium characterization and shock propagation in conflict networks," Journal of Economic Theory, Elsevier, vol. 206(C).
    4. Dziubiński, Marcin & Goyal, Sanjeev & Minarsch, David E.N., 2021. "The strategy of conquest," Journal of Economic Theory, Elsevier, vol. 191(C).
    5. Cortes-Corrales, Sebastián & Gorny, Paul M., 2018. "Generalising Conflict Networks," MPRA Paper 90001, University Library of Munich, Germany.
    6. Serhat Doğan & Kerim Keskin & Çağrı Sağlam, 2020. "Contests over joint production on networks," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 377-400, April.
    7. Sun, Xiang & Xu, Jin & Zhou, Junjie, 2023. "Effort discrimination and curvature of contest technology in conflict networks," Games and Economic Behavior, Elsevier, vol. 142(C), pages 978-991.
    8. Bo Chen & Shanlin Jin, 2023. "Elimination contests with collusive team players," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(1), pages 61-89, February.
    9. Zenou, Yves & Amarasinghe, Ashani & Raschky, Paul & Zhou, Junjie, 2020. "Conflicts in Spatial Networks," CEPR Discussion Papers 14300, C.E.P.R. Discussion Papers.

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    More about this item

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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