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A Noncooperative Model of Contest Network Formation

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Abstract

Network structure has a significant role in determining the outcomes of many socio-economic relationships, including antagonistic ones. In this paper we study a situation in which agents, embedded in a network, simultaneously play interrelated bilateral contest games with their neighbours. Spillovers between contests induce complex local and global network effects. We first characterize the equilibrium of the game on an arbitrary fixed network. Then we study a network formation model, introducing a novel but intuitive link formation protocol. As links represent negative relationships, link formation is unilateral while link destruction is a bilateral action. The unique stable network topology is the complete k-partite network with partitions of different sizes. This model also provides a micro-foundation for the concept of structural balance, and the main results go in line with theoretical and empirical findings from other disciplines, including biology and sociology.

Suggested Citation

  • Kenan Huremovic, 2015. "A Noncooperative Model of Contest Network Formation," AMSE Working Papers 1521, Aix-Marseille School of Economics, France, revised Feb 2015.
  • Handle: RePEc:aim:wpaimx:1521
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    References listed on IDEAS

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    Cited by:

    1. Cortes-Corrales, Sebastián & Gorny, Paul M., 2018. "Generalising Conflict Networks," MPRA Paper 90001, University Library of Munich, Germany.
    2. Xu, Jin & Zenou, Yves & Zhou, Junjie, 2019. "Networks in Conflict: A Variational Inequality Approach," CEPR Discussion Papers 13647, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    network formation; game on network; contest; structural balance;

    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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