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Communication network formation with link specificity and value transferability

Author

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  • Harmsen - van Hout, M.J.W.

    (Marketing & Supply Chain Management)

  • Herings, P.J.J.

    (Microeconomics & Public Economics)

  • Dellaert, B.G.C.

    (Externe publicaties SBE)

Abstract

We propose a model on strategic formation of communication networks with (i) link specificity: the more direct links somebody maintains, the less she can specify her attention per link, the lower her links’ value, while this negative externality was previously ignored in the communication context, and (ii) value transferability via indirect links for informational but not for social value from communication, while this positive externality was modeled uniformly before. Assuming only social value to isolate the impact of link specificity, the pairwise stable set includes many nonstandard networks under high or particular combinations of fully connected components under low link specificity. Allowing for social and informational value, the joint effect of link specificity and value transferability reduces the stable set to certain fragmented networks under high or the complete network under low link specificity. These extremes are beneficial for efficiency, whereas quite inefficient networks may arise for intermediate link specificity.
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  • Harmsen - van Hout, M.J.W. & Herings, P.J.J. & Dellaert, B.G.C., 2011. "Communication network formation with link specificity and value transferability," Research Memorandum 022, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    • Handle: RePEc:unm:umamet:2011022
    DOI: 10.26481/umamet.2011022
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    1. Harmsen - van Hout, Marjolein J.W. & Herings, P. Jean-Jacques & Dellaert, Benedict G.C., 2013. "Communication network formation with link specificity and value transferability," European Journal of Operational Research, Elsevier, vol. 229(1), pages 199-211.
    2. Bernstein, Ronald & Madlener, Reinhard, 2011. "Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis," FCN Working Papers 8/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    3. Sorda, Giovanni & Sunak, Yasin & Madlener, Reinhard, 2011. "A Spatial MAS Simulation to Evaluate the Promotion of Electricity from Agricultural Biogas Plants in Germany," FCN Working Papers 1/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Oct 2012.
    4. Olaizola, Norma & Valenciano, Federico, 2020. "A connections model with decreasing returns link-formation technology," MPRA Paper 107585, University Library of Munich, Germany.
    5. Harmsen - van Hout, Marjolein J.W. & Dellaert, Benedict G.C. & Herings, P. Jean-Jacques, 2016. "Heuristic decision making in network linking," European Journal of Operational Research, Elsevier, vol. 251(1), pages 158-170.
    6. Olaizola, Norma & Valenciano, Federico, 2014. "Asymmetric flow networks," European Journal of Operational Research, Elsevier, vol. 237(2), pages 566-579.
      • Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2012. "Asymmetric flow networks," IKERLANAK http://www-fae1-eao1-ehu-, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    7. Norma Olaizola & Federico Valenciano, 2023. "A connections model with decreasing returns link-formation technology," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 14(1), pages 31-61, March.
    8. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "An Evaluation of Attribute Anchoring Bias in a Choice Experimental Setting," FCN Working Papers 6/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    9. Dergiades, Theologos & Madlener, Reinhard & Christofidou, Georgia, 2018. "The nexus between natural gas spot and futures prices at NYMEX: Do weather shocks and non-linear causality in low frequencies matter?," The Journal of Economic Asymmetries, Elsevier, vol. 18(C), pages 1-1.
    10. Melchior, Tobias & Madlener, Reinhard, 2012. "Economic evaluation of IGCC plants with hot gas cleaning," Applied Energy, Elsevier, vol. 97(C), pages 170-184.
    11. Michelsen, Carl Christian & Madlener, Reinhard, 2011. "Homeowners' Preferences for Adopting Residential Heating Systems: A Discrete Choice Analysis for Germany," FCN Working Papers 9/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    12. Norma Olaizola & Federico Valenciano, 2020. "Characterization of efficient networks in a generalized connections model with endogenous link strength," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(3), pages 341-367, September.
    13. Tenev, Anastas P., 2024. "“Friends Are Thieves of Time”: Heuristic attention sharing in stable friendship networks," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 785-809.
    14. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "The Impact of Green Framing on Consumers’ Valuations of Energy-Saving Measures," FCN Working Papers 7/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    15. Achtnicht, Martin, 2010. "Do Environmental Benefits Matter? A Choice Experiment Among House Owners in Germany," FCN Working Papers 27/2010, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    16. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Challenges in the Evaluation of Ultra-Long-Lived Projects: Risk Premia for Projects with Eternal Returns or Costs," FCN Working Papers 13/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    17. Rêgo, Leandro Chaves & dos Santos, Andrea Maria, 2019. "Co-authorship model with link strength," European Journal of Operational Research, Elsevier, vol. 272(2), pages 587-594.
    18. Rohlfs, Wilko & Madlener, Reinhard, 2011. "Multi-Commodity Real Options Analysis of Power Plant Investments: Discounting Endogenous Risk Structures," FCN Working Papers 22/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    19. Fershtman, Chaim & Persitz, Dotan, 2018. "Social Clubs and Social Networks," CEPR Discussion Papers 12874, C.E.P.R. Discussion Papers.
    20. Chiu Ki So, 2016. "Network Formation with Endogenous Link Strength and Decreasing Returns to Investment," Games, MDPI, vol. 7(4), pages 1-9, December.
    21. Kraas, Birk & Schroedter-Homscheidt, Marion & Pulvermüller, Benedikt & Madlener, Reinhard, 2011. "Economic Assessment of a Concentrating Solar Power Forecasting System for Participation in the Spanish Electricity Market," FCN Working Papers 12/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

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    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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