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Network formation with closeness incentives

Author

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  • Buechel, Berno

    (Center for Mathematical Economics, Bielefeld University)

Abstract

We study network formation in a strategic setting where every agent strives for short paths to the other agents. The main parameter of our model is the marginal rate of substitution between network benefits and linking costs. We provide boundaries of stable networks for increasing and decreasing marginal returns. The formulated model stands in strong relation to the famous connections model (Jackson & Wolinsky '96): we show that for certain parameter values both models induce the same network structures.

Suggested Citation

  • Buechel, Berno, 2011. "Network formation with closeness incentives," Center for Mathematical Economics Working Papers 395, Center for Mathematical Economics, Bielefeld University.
    • Handle: RePEc:bie:wpaper:395
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    References listed on IDEAS

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    1. Antoni Calvó-Armengol & Rahmi İlkılıç, 2009. "Pairwise-stability and Nash equilibria in network formation," International Journal of Game Theory, Springer;Game Theory Society, vol. 38(1), pages 51-79, March.
    2. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    3. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 305-318, October.
    4. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    5. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
    6. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 319-349, October.
    7. K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
    8. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
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    Cited by:

    1. Somayeh Koohborfardhaghighi & Jorn Altmann, 2016. "How Network Visibility and Strategic Networking Leads to the Emergence of Certain Network Characteristics: A Complex Adaptive System Approach," TEMEP Discussion Papers 2016130, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Aug 2016.
    2. K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
    3. Buechel, Berno & Buskens, Vincent, 2011. "The dynamics of closeness and betweenness," Center for Mathematical Economics Working Papers 398, Center for Mathematical Economics, Bielefeld University.
    4. Somayeh Koohborfardhaghighi & Jorn Altmann, 2016. "How Strategic Networking Impacts the Networking Outcome: A Complex Adaptive System Approach," TEMEP Discussion Papers 2016131, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Aug 2016.
    5. repec:use:tkiwps:3434 is not listed on IDEAS
    6. Somayeh Koohborfardhaghighi & Jörn Altmann, 2015. "A Network Formation Model for Social Object Networks," Springer Books, in: Zhenji Zhang & Zuojun Max Shen & Juliang Zhang & Runtong Zhang (ed.), Liss 2014, edition 127, pages 615-625, Springer.
    7. 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.
    8. Pramod C. Mane & Nagarajan Krishnamurthy & Kapil Ahuja, 2019. "Formation of Stable and Efficient Social Storage Cloud," Games, MDPI, vol. 10(4), pages 1-17, November.
    9. Berno Buechel & Tim Hellmann, 2012. "Under-connected and over-connected networks: the role of externalities in strategic network formation," Review of Economic Design, Springer;Society for Economic Design, vol. 16(1), pages 71-87, March.
    10. repec:use:tkiwps:1616 is not listed on IDEAS
    11. K. de Jaegher & J.J.A. Kamphorst, 2009. "Two-way Flow Networks with Small Decay," Working Papers 09-34, Utrecht School of Economics.

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