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Bounded rationality and repeated network formation

Author

Listed:
  • Sylvain Béal

    (CREUSET - Centre de Recherche Economique de l'Université de Saint-Etienne - UJM - Université Jean Monnet - Saint-Étienne)

  • Nicolas Quérou

    (School of Management and Economics - QUB - Queen's University [Belfast])

Abstract

We define a finite-horizon repeated network formation game with consent and study the differences induced by two levels of individual rationality. Perfectly rational players will remain unconnected at the equilibrium, while nonempty equilibrium networks may form when players are assumed to behave as finite automata of limited complexity. We provide structural properties of the sequences of networks which are likely to form in Nash and subgame perfect Nash equilibria of the repeated game. For instance, players can form totally different connected networks at each period or the sequence of networks can exhibit a total order relationship.

Suggested Citation

  • Sylvain Béal & Nicolas Quérou, 2007. "Bounded rationality and repeated network formation," Post-Print ujm-00162449, HAL.
  • Handle: RePEc:hal:journl:ujm-00162449
    DOI: 10.1016/j.mathsocsci.2007.03.003
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    References listed on IDEAS

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    Cited by:

    1. Schuster, Stephan, 2012. "Applications in Agent-Based Computational Economics," MPRA Paper 47201, University Library of Munich, Germany.
    2. Schuster, Stephan, 2010. "Network Formation with Adaptive Agents," MPRA Paper 27388, University Library of Munich, Germany.

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    More about this item

    Keywords

    Repeated network formation game; Two-sided link formation costs; Bounded rationality; Automata; Subgame perfection;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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