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Influence and Social Tragedy in Networks

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  • Yann Rébillé
  • Lionel Richefort

Abstract

We model agents in a network game with strategic complementarities and negative externalities. This class of games encompass many economic applications, ranging from social influences in smoking behavior to the arms race between enemy countries. Sufficient conditions for the existence of a unique Nash equilibrium and a unique social optimum are established. The connection between these two profiles is made through the Bonacich centrality measure. Next, it is shown that each player who causes or receives some influence in the network exerts strictly too much effort at equilibrium. When the social optimum is interior, the over effort, the loss in welfare and the optimal tax, then, appear to be functions of the structure of the network.

Suggested Citation

  • Yann Rébillé & Lionel Richefort, 2015. "Influence and Social Tragedy in Networks," Revue d'économie politique, Dalloz, vol. 125(6), pages 811-833.
    • Handle: RePEc:cai:repdal:redp_256_0811
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