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Non-Cooperative Network Formation with Network Maintenance Costs

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  • Filippo VERGARA CAFFARELLI

Abstract

This paper presents a model of non-cooperative network formation similar to Bala and Goyal (2000), except that marginal costs in the size of the network is increasing. Agents link among each other to gain information and update their links according to a better reply dynamics. In the long run the system settles in a state that consists of starred-wheel networks. This is reminiscent of some real world features. Collections of smaller disjoint networks connecting few agents are more common than global networks connecting all agents of the community. Di.erences within a connected component such as core and periphery are established.

Suggested Citation

  • Filippo VERGARA CAFFARELLI, 2004. "Non-Cooperative Network Formation with Network Maintenance Costs," Economics Working Papers ECO2004/18, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2004/18
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    Citations

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    Cited by:

    1. Gaudeul, Alexia & Mathieu, Laurence & Peroni, Chiara, 2008. "Blogs and the Economics of Reciprocal Attention," MPRA Paper 11298, University Library of Munich, Germany.
    2. M. Ziliotti, 2007. "I prezzi di accesso alle reti di servizi di pubblica utilità: una sintesi teorica," Economics Department Working Papers 2007-EP01, Department of Economics, Parma University (Italy).
    3. K. de Jaegher & J.J.A. Kamphorst, 2009. "Two-way Flow Networks with Small Decay," Working Papers 09-34, Utrecht School of Economics.
    4. Alessio D'Ignazio & Emanuele Giovannetti, 2006. "From Exogenous To Endogenous Economic Networks: Internet Applications," Journal of Economic Surveys, Wiley Blackwell, vol. 20(5), pages 757-796, December.
    5. 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.
    6. K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
    7. D'Ignazio, A. & Giovannetti, E., 2004. "From Exogenous to Endogenous Networks: Internet Applications," Cambridge Working Papers in Economics 0445, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Networks; Coordination; Learning dynamics; Non-cooperative games;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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