IDEAS home Printed from https://ideas.repec.org/p/hal/cesptp/halshs-01960682.html
   My bibliography  Save this paper

Sequential competition and the strategic origins of preferential attachment

Author

Listed:
  • Antoine Mandel

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Xavier Venel

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

Abstract

There exists a wide gap between the predictions of strategic models of network formation and empirical observations of the characteristics of socio-economic networks. Empirical observations underline a complex structure characterized by fat-tailed degree distribution, short average distance, large clustering coefficient and positive assortativity. Game theoretic models offer a detailed representation of individuals' incentives but they predict the emergence of much simpler structures than these observed empirically. Random network formation processes, such as preferential attachment, provide a much better fit to empirical observations but generally lack micro-foundations. in order to bridge this gap, we propose to model network formation as extensive games and investigate under which conditions equilibria of these games are observationally equivalent with random network formation process. In particular, we introduce a class of games in which players compete with their predecessors and their successors for the utility induced by the links they form with another node in the network. Such sequential competition games can represent a number of strategic economic interactions such as oligopolistic competition in supply networks or diffusion of influence in opinion networks. we show that the focal equilibrium that emerge in this setting is one where players use probability distributions with full support and target the whole network with probabilities inversely proportional to the utility of each node. Notably, when the utility of a node is inversely proportional to its degree, equilibrium play induces a preferential attachment process.

Suggested Citation

  • Antoine Mandel & Xavier Venel, 2018. "Sequential competition and the strategic origins of preferential attachment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01960682, HAL.
  • Handle: RePEc:hal:cesptp:halshs-01960682
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01960682
    as

    Download full text from publisher

    File URL: https://halshs.archives-ouvertes.fr/halshs-01960682/document
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Chaney, 2014. "The Network Structure of International Trade," American Economic Review, American Economic Association, vol. 104(11), pages 3600-3634, November.
    2. Page, Frank Jr. & Wooders, Myrna H. & Kamat, Samir, 2005. "Networks and farsighted stability," Journal of Economic Theory, Elsevier, vol. 120(2), pages 257-269, February.
    3. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
    4. 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.
    5. Herings, P. Jean-Jacques & Mauleon, Ana & Vannetelbosch, Vincent, 2009. "Farsightedly stable networks," Games and Economic Behavior, Elsevier, vol. 67(2), pages 526-541, November.
    6. Michel Grabisch & Antoine Mandel & Agnieszka Rusinowska & Emily Tanimura, 2018. "Strategic Influence in Social Networks," Mathematics of Operations Research, INFORMS, vol. 43(1), pages 29-50, February.
    7. Erzo G. J. Luttmer, 2011. "On the Mechanics of Firm Growth," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 1042-1068.
    8. Mayer, Adalbert & Puller, Steven L., 2008. "The old boy (and girl) network: Social network formation on university campuses," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 329-347, February.
    9. Matthew O. Jackson & Brian W. Rogers, 2007. "Meeting Strangers and Friends of Friends: How Random Are Social Networks?," American Economic Review, American Economic Association, vol. 97(3), pages 890-915, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Socio-economic networks; endogenous networks formation; game theory; Réseaux socio-économiques; formation endogène des réseaux; théorie des jeux; attachement préférentiel;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-01960682. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.