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A noncooperative model of network formation with decreasing productivity

Author

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  • Charoensook, Banchongsan

Abstract

This paper develops a model of noncooperative network formation. Link formation is two-sided. Information flow is two-way. The paper is based on Bala and Goyal (2000) with the following difference in assumption: the value of information decays as it flows through each agent, and the decay is increasing and concave in the number of his links. Thus, an agent may choose to avoid accessing an agent who possess many links since he is aware of the decay incurred through this agent. This avoidance leads to two particular results in the analysis of Nash networks: (1) Nash networks are not always connected; (2) Nash networks do not exist under some parameters. Since disconnectedness is reminiscent of a common feature of real-world network, the model may explain why real-world networks may exhibit this feature even when there is no heterogeneity among agents. Discussion on this insight is provided.

Suggested Citation

  • Charoensook, Banchongsan, 2012. "A noncooperative model of network formation with decreasing productivity," MPRA Paper 36570, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36570
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    References listed on IDEAS

    as
    1. Francesco Feri & Miguel Meléndez-Jiménez, 2013. "Coordination in evolving networks with endogenous decay," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 955-1000, November.
    2. 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.
    3. K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
    4. repec:use:tkiwps:1616 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Möhlmeier, Philipp & Rusinowska, Agnieszka & Tanimura, Emily, 2018. "Competition for the access to and use of information in networks," Mathematical Social Sciences, Elsevier, vol. 92(C), pages 48-63.

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    More about this item

    Keywords

    Social Networks; Game Theory; Network Formation;
    All these keywords.

    JEL classification:

    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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