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Networks with decreasing returns to linking

Listed author(s):
  • Filippo Vergara Caffarelli

    ()

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

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.

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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2009/2009-0734/en_tema_734.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 734.

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Date of creation: Nov 2009
Handle: RePEc:bdi:wptemi:td_734_09
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