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Rent Seeking and Power Hierarchies: A Noncooperative Model of Network Formation with Antagonistic Links

Author

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  • Kenan Huremovic

    (Department of Economics, European University Institute, Italy)

Abstract

Network structure has a significant role in determining the outcomes of many socioeconomic relationships, including the antagonistic ones. In this paper we study a situation in which agents, embedded in a network, simultaneously play interrelated bilateral contest games with their neighbors. Interrelatedness of contests induces complex local and global network effects. We first characterize the equilibrium of a game on an arbitrary fixed network. Then we study a dynamic network formation model, introducing a novel but intuitive link formation protocol. As links represent antagonistic relationships, link formation is unilateral while link destruction is bilateral. A complete k-partite network is the unique stable network topology. As a result, the model provides a micro-foundation for the structural balance concept in social psychology, and the main results go in line with theoretical and empirical findings from other disciplines, including international relations, sociology and biology.

Suggested Citation

  • Kenan Huremovic, 2014. "Rent Seeking and Power Hierarchies: A Noncooperative Model of Network Formation with Antagonistic Links," Working Papers 2014.45, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2014.45
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    References listed on IDEAS

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    1. Deroian, F., 2009. "Endogenous link strength in directed communication networks," Mathematical Social Sciences, Elsevier, vol. 57(1), pages 110-116, January.
    2. repec:cup:cbooks:9780511771576 is not listed on IDEAS
    3. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    4. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    5. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    6. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
    7. Nti, Kofi O, 1997. "Comparative Statics of Contests and Rent-Seeking Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 43-59, February.
    8. Goodman, John C, 1980. "Note on Existence and Uniqueness of Equilibrium Points for Concave N-Person Games," Econometrica, Econometric Society, vol. 48(1), pages 251-251, January.
    9. Easley,David & Kleinberg,Jon, 2010. "Networks, Crowds, and Markets," Cambridge Books, Cambridge University Press, number 9780521195331, October.
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    Cited by:

    1. Grandjean, G. & Tellone, D. & Vergote, W., 2016. "Cooperation, Competition and Entry in a Tullock Contest," CORE Discussion Papers 2016032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Grandjean, G. & Tellone, D. & Vergote, W., 2017. "Endogenous network formation in a Tullock contest," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 1-10.
    3. Marcin Dziubinski & Sanjeev Goyal & Adrien Vigier, 2015. "Conflict and Networks," Cambridge Working Papers in Economics 1565, Faculty of Economics, University of Cambridge.
    4. Yann Bramoullé & Rachel Kranton, 2015. "Games Played on Networks," Working Papers halshs-01180657, HAL.
    5. Christian Ewerhart & Kremena Valkanova, 2016. "Fictitious play in networks," ECON - Working Papers 239, Department of Economics - University of Zurich.

    More about this item

    Keywords

    Network Formation; Structural Balance; Contest;

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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