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Coordination in evolving networks with endogenous decay

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  • Francesco Feri
  • Miguel Meléndez-Jiménez

Abstract

This paper studies an evolutionary model of network formation with endogenous decay, in which agents benefit both from direct and indirect connections. In addition to forming (costly) links, agents choose actions for a coordination game that determines the level of decay of each link. We address the issues of coordination (long-run equilibrium selection) and network formation by means of stochastic stability techniques. We find that the long-run behavior of the system depends on a fine interplay of the link cost and the trade-off between efficiency and risk-dominance. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Francesco Feri & Miguel Meléndez-Jiménez, 2013. "Coordination in evolving networks with endogenous decay," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 955-1000, November.
  • Handle: RePEc:spr:joevec:v:23:y:2013:i:5:p:955-1000
    DOI: 10.1007/s00191-013-0313-9
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    Cited by:

    1. Harmsen - van Hout, Marjolein J.W. & Herings, P. Jean-Jacques & Dellaert, Benedict G.C., 2013. "Communication network formation with link specificity and value transferability," European Journal of Operational Research, Elsevier, vol. 229(1), pages 199-211.
    2. Norma Olaizola & Federico Valenciano, 2020. "Characterization of efficient networks in a generalized connections model with endogenous link strength," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(3), pages 341-367, September.
    3. Hellmann, Tim & Staudigl, Mathias, 2014. "Evolution of social networks," European Journal of Operational Research, Elsevier, vol. 234(3), pages 583-596.
    4. Chiu Ki So, 2016. "Network Formation with Endogenous Link Strength and Decreasing Returns to Investment," Games, MDPI, vol. 7(4), pages 1-9, December.
    5. Antonio Parravano & Ascensión Andina-Díaz & Miguel A Meléndez-Jiménez, 2016. "Bounded Confidence under Preferential Flip: A Coupled Dynamics of Structural Balance and Opinions," PLOS ONE, Public Library of Science, vol. 11(10), pages 1-23, October.
    6. Olaizola, Norma & Valenciano, Federico, 2020. "A connections model with decreasing returns link-formation technology," MPRA Paper 107585, University Library of Munich, Germany.
    7. Enrique Fatas & Miguel Meléndez-Jiménez & Antonio Morales & Hector Solaz, 2015. "Public goods and decay in networks," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(1), pages 73-90, March.
    8. Charoensook, Banchongsan, 2012. "A noncooperative model of network formation with decreasing productivity," MPRA Paper 36570, University Library of Munich, Germany.
    9. De Jaegher, K. & Kamphorst, J.J.A., 2015. "Minimal two-way flow networks with small decay," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 217-239.
    10. Norma Olaizola & Federico Valenciano, 2023. "A connections model with decreasing returns link-formation technology," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 14(1), pages 31-61, March.

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    More about this item

    Keywords

    Coordination; Networks; Risk-dominance; Stochastic stability; C72; C73; D83; D85;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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