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Communication networks with endogeneous link strength

  • Francis Bloch

    (Ecole Polytechnique, France)

  • Bhaskar Dutta

    ()

    (University of Warwick, UK)

This paper analyzes the formation of networks when players choose how much to invest in each relationship. We suppose that players have a fixed endowment that they can allocate across links, and in the baseline model, suppose that link strength is an additively separable and convex function of individual investments, and that agents use the path which maximizes the product of link strengths. We show that both the stable and efficient network architectures are stars. However, the investments of the hub may differ in stable and efficient networks. Under alternative assumptions on the investment technology and the reliability measure, other network architectures can emerge as efficient and stable.

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File URL: http://www.isid.ac.in/~pu/dispapers/dp08-15.pdf
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Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 08-15.

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Length: 32 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:ind:isipdp:08-15
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  1. Antonio Cabrales & Antoni Calvo-Armengol & Yves Zenou, 2007. "Effort and synergies in network formation," Economics Working Papers we072515, Universidad Carlos III, Departamento de Economía.
  2. Feri, Francesco, 2007. "Stochastic stability in networks with decay," Journal of Economic Theory, Elsevier, vol. 135(1), pages 442-457, July.
  3. Jan K. Brueckner, 2004. "Friendship Networks," Econometric Society 2004 North American Winter Meetings 184, Econometric Society.
  4. Goyal, S. & Moraga-Gonzalez, J.L., 2000. "R&D Networks," Econometric Institute Research Papers EI 2000-26A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  5. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
  6. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
  7. repec:dgr:kubcen:200470 is not listed on IDEAS
  8. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
  9. Sanjeev Goyal, 2005. "Strong and Weak Links," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 608-616, 04/05.
  10. 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.
  11. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
  12. Jacques Durieu & Hans Haller & Philippe Solal, 2004. "Nonspecific Networking," Game Theory and Information 0403005, EconWPA.
  13. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  14. Sanjeev Goyal & Alexander Konovalov & Jose Luis Moraga-Gonzalez, 2003. "Hybrid R&D," Economics Discussion Papers 564, University of Essex, Department of Economics.
  15. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  16. Gilles, R.P. & Sarangi, S., 2004. "Social Network Formation with Consent," Discussion Paper 2004-70, Tilburg University, Center for Economic Research.
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