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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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    File URL: https://mpra.ub.uni-muenchen.de/37099/1/MPRA_paper_37099.pdf
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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. repec:use:tkiwps:1616 is not listed on IDEAS
    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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:hal:journl:halshs-01316936 is not listed on IDEAS
    2. Philipp Möhlmeier & Agnieszka Rusinowska & Emily Tanimura, 2016. "Competition for the access to and use of information in networks," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01316936, HAL.
    3. repec:eee:matsoc:v:92:y:2018:i:c:p:48-63 is not listed on IDEAS
    4. Philipp Möhlmeier & Agnieszka Rusinowska & Emily Tanimura, 2016. "Competition for the access to and use of information in networks," Documents de travail du Centre d'Economie de la Sorbonne 16033, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

    More about this item

    Keywords

    Social Networks; Game Theory; Network Formation;

    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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