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Social activity and network formation

Author

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  • Baetz, Oliver

    () (Department of Economics, University of Cambridge)

Abstract

This paper develops a simple model in which a social hierarchy emerges endogenously when agents form a network for complementary interaction (``activity''). Specifically, we assume that agents are ex ante identical and their best response activity, as well as their value function, increases (strictly) concavely in the total activity of their neighbours in the network. There exists a unique and stable positive activity equilibrium on exogenous networks under mild conditions. When we endogenise network formation, equilibria become strongly structured: more active players have more neighbours, i.e. a higher degree, but tend to sponsor fewer links. Additionally, in strict equilibria agents separate themselves into groups characterised by the symmetric activity of their members. The characteristic activity decreases in group size and the network is a complete multipartite graph.

Suggested Citation

  • Baetz, Oliver, 2015. "Social activity and network formation," Theoretical Economics, Econometric Society, vol. 10(2), May.
  • Handle: RePEc:the:publsh:1487
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2017. "Efficiency of weighted networks," IKERLANAK Ikerlanak;2017-104, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. Julia Müller & Thorsten Upmann, 2017. "Eigenvalue Productivity: Measurement of Individual Contributions in Teams," CESifo Working Paper Series 6679, CESifo Group Munich.
    3. repec:eee:mateco:v:70:y:2017:i:c:p:154-165 is not listed on IDEAS
    4. repec:eee:jeborg:v:141:y:2017:i:c:p:43-63 is not listed on IDEAS
    5. Gauer, F. & Hellmann, T., 2017. "Strategic formation of homogeneous bargaining networks," Games and Economic Behavior, Elsevier, vol. 106(C), pages 51-74.
    6. Boucher, Vincent, 2016. "Conformism and self-selection in social networks," Journal of Public Economics, Elsevier, vol. 136(C), pages 30-44.
    7. David Goldbaum, 2016. "Conformity and Influence," Working Paper Series 35, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    8. Bernard Herskovic & Joao Ramos, 2016. "Acquiring information through peers," 2016 Meeting Papers 248, Society for Economic Dynamics.
    9. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2016. "A Marginalist Model of Network Formation," IKERLANAK Ikerlanak;2016-99, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.

    More about this item

    Keywords

    Network formation; strategic complementarity; supermodularity; peer effects; social hierarchy;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D00 - Microeconomics - - General - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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