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Building Social Networks

  • Robert P. Gilles
  • Sudipta Sarangi

We examine the process of building social relationships as a non-cooperative game that requires mutual consent and involves reaching out to others at a cost. Players create their social network from amongst their set of acquaintances. Having acquaintances allows players to form naive beliefs about the feasibility of building direct relationships with their acquaintances. These myopic beliefs describe how the other players are expected to respond to the initiation of a link by a player. We introduce a stability concept called "monadic stability" where agents play a best response to their formed myopic beliefs such that these beliefs are self-confirming. The resulting equilibrium networks form subset of the set of pairwise stable networks.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44839.de/dp642.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 642.

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Length: 28 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp642
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  1. Bloch, Francis & Jackson, Matthew, 2004. "The Formation of Networks with Transfers among Players," Working Papers 1194, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Matthew O. Jackson, 2003. "A survey of models of network formation: Stability and efficiency," Working Papers 1161, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Matthew O. Jackson & Alison Watts, 2000. "On the Formation of Interaction Networks in Social Coordination Games," Econometric Society World Congress 2000 Contributed Papers 0778, Econometric Society.
  4. ELLEFLAMME, Paul & BLOCH, Francis, . "Market sharing agreements and collusive networks," CORE Discussion Papers RP -1711, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Fudenberg, Drew & Levine, David K, 1993. "Self-Confirming Equilibrium," Econometrica, Econometric Society, vol. 61(3), pages 523-45, May.
  6. Dutta, B. & van den Nouweland, C.G.A.M. & Tijs, S.H., 1998. "Link formation in cooperative situations," Other publications TiSEM fb302bdf-f6ab-4909-99d5-5, Tilburg University, School of Economics and Management.
  7. Sudipta Sarangi & Robert P. Gilles, . "Stable Networks and Convex Payoffs," Departmental Working Papers 2005-13, Department of Economics, Louisiana State University.
  8. repec:ner:tilbur:urn:nbn:nl:ui:12-82556 is not listed on IDEAS
  9. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. repec:ebl:ecbull:v:3:y:2003:i:5:p:1-9 is not listed on IDEAS
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