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Networks with decreasing returns to linking

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  • Filippo Vergara Caffarelli

    () (Bank of Italy JEL classification: C72, D83, D85)

Abstract

This paper presents a model of non-cooperative network formation in which the marginal benefit of new links eventually decreases. Agents link with each other to gain information and update their links according to better-reply dynamics. In the long run the system settles to a unique network architecture that consists of a constellation of starred wheels. This is reminiscent of some real-world features. Collections of smaller disjoint networks connecting only a few agents are more common than global networks connecting all the agents in a community. Differences within a connected component such as the centre and the periphery are established.

Suggested Citation

  • Filippo Vergara Caffarelli, 2009. "Networks with decreasing returns to linking," Temi di discussione (Economic working papers) 734, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_734_09
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    Cited by:

    1. Filippo Vergara Caffarelli, 2017. "One-Way Flow Networks with Decreasing Returns to Linking," Dynamic Games and Applications, Springer, vol. 7(2), pages 323-345, June.

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    Keywords

    networks; coordination; learning dynamics; non-cooperative games;

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