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Bounded rationality and repeated network formation

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  • Beal, Sylvain
  • Querou, Nicolas

Abstract

We define a finite-horizon repeated network formation game with consent and study the differences induced by two levels of individual rationality. Perfectly rational players will remain unconnected at the equilibrium, while nonempty equilibrium networks may form when players are assumed to behave as finite automata of limited complexity. We provide structural properties of the sequences of networks which are likely to form in Nash and subgame perfect Nash equilibria of the repeated game. For instance, players can form totally different connected networks at each period or the sequence of networks can exhibit a total order relationship.
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  • Beal, Sylvain & Querou, Nicolas, 2007. "Bounded rationality and repeated network formation," Mathematical Social Sciences, Elsevier, vol. 54(1), pages 71-89, July.
  • Handle: RePEc:eee:matsoc:v:54:y:2007:i:1:p:71-89
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    Cited by:

    1. Schuster, Stephan, 2010. "Network Formation with Adaptive Agents," MPRA Paper 27388, University Library of Munich, Germany.
    2. Schuster, Stephan, 2012. "Applications in Agent-Based Computational Economics," MPRA Paper 47201, University Library of Munich, Germany.

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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