IDEAS home Printed from https://ideas.repec.org/p/use/tkiwps/0816.html
   My bibliography  Save this paper

Network formation with decreasing marginal benefits of information

Author

Listed:
  • K. de Jaegher
  • J.J.A. Kamphorst

Abstract

In the two-way flow connections model of the seminal paper by Bala and Goyal (2000a), the marginal benefit of obtaining the information of one more player is constant. However, it is plausible that the marginal benefit of such information is decreasing. This paper explores the consequences for the stability of networks of such decreasing marginal benefits. We start by characterizing the strict Nash networks for both the case of constant and the case of decreasing marginal benefits. Using this characterization, we next explore how the set of strict Nash networks differs for the two cases. The results and intuition tells us that long diameter networks have certain features which make them relatively more likely to be stable under decreasing marginal benefits of information as compared to short diameter networks.

Suggested Citation

  • K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
    • Handle: RePEc:use:tkiwps:0816
    as

    Download full text from publisher

    File URL: https://dspace.library.uu.nl/bitstream/handle/1874/309743/08_16.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jurjen Kamphorst & Gerard Van Der Laan, 2007. "Network Formation Under Heterogeneous Costs: The Multiple Group Model," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 9(04), pages 599-635.
    2. Haller, Hans & Sarangi, Sudipta, 2005. "Nash networks with heterogeneous links," Mathematical Social Sciences, Elsevier, vol. 50(2), pages 181-201, September.
    3. Buechel Berno, 2009. "Network Formation with Closeness Incentives," Lecture Notes in Economics and Mathematical Systems, in: Ahmad K. Naimzada & Silvana Stefani & Anna Torriero (ed.), Networks, Topology and Dynamics, pages 95-109, Springer.
    4. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
    5. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    6. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
    7. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 319-349, October.
    8. Filippo VERGARA CAFFARELLI, 2004. "Non-Cooperative Network Formation with Network Maintenance Costs," Economics Working Papers ECO2004/18, European University Institute.
    9. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Buechel, Berno & Buskens, Vincent, 2011. "The dynamics of closeness and betweenness," Center for Mathematical Economics Working Papers 398, Center for Mathematical Economics, Bielefeld University.
    2. Charoensook, Banchongsan, 2012. "A noncooperative model of network formation with decreasing productivity," MPRA Paper 36570, University Library of Munich, Germany.
    3. Buechel Berno, 2009. "Network Formation with Closeness Incentives," Lecture Notes in Economics and Mathematical Systems, in: Ahmad K. Naimzada & Silvana Stefani & Anna Torriero (ed.), Networks, Topology and Dynamics, pages 95-109, Springer.
    4. Pascal Billand & Christophe Bravard & Sudipta Sarangi & J. Kamphorst, 2011. "Confirming information flows in networks," Post-Print halshs-00672351, HAL.
    5. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:use:tkiwps:1616 is not listed on IDEAS
    2. K. de Jaegher & J.J.A. Kamphorst, 2009. "Two-way Flow Networks with Small Decay," Working Papers 09-34, Utrecht School of Economics.
    3. repec:use:tkiwps:3434 is not listed on IDEAS
    4. Joost Vandenbossche & Thomas Demuynck, 2013. "Network Formation with Heterogeneous Agents and Absolute Friction," Computational Economics, Springer;Society for Computational Economics, vol. 42(1), pages 23-45, June.
    5. Buechel, Berno & Buskens, Vincent, 2011. "The dynamics of closeness and betweenness," Center for Mathematical Economics Working Papers 398, Center for Mathematical Economics, Bielefeld University.
    6. De Jaegher, K. & Kamphorst, J.J.A., 2015. "Minimal two-way flow networks with small decay," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 217-239.
    7. Billand, Pascal & Bravard, Christophe & Sarangi, Sudipta, 2012. "Existence of Nash networks and partner heterogeneity," Mathematical Social Sciences, Elsevier, vol. 64(2), pages 152-158.
    8. 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.
    9. Pascal Billand & Christophe Bravard & Sudipta Sarangi & J. Kamphorst, 2011. "Confirming information flows in networks," Post-Print halshs-00672351, HAL.
    10. Filippo Vergara Caffarelli, 2017. "One-Way Flow Networks with Decreasing Returns to Linking," Dynamic Games and Applications, Springer, vol. 7(2), pages 323-345, June.
    11. Pascal Billand & Christophe Bravard & Sudipta Sarangi, 2011. "Strict Nash networks and partner heterogeneity," International Journal of Game Theory, Springer;Game Theory Society, vol. 40(3), pages 515-525, August.
    12. Billand, Pascal & Bravard, Christophe & Kamphorst, Jurjen & Sarangi, Sudipta, 2017. "Network formation when players seek confirmation of information," Mathematical Social Sciences, Elsevier, vol. 89(C), pages 20-31.
    13. Gao Hongwei & Qiao Han & Sedakov Artem & Wang Lei, 2015. "A Dynamic Formation Procedure of Information Flow Networks," Journal of Systems Science and Information, De Gruyter, vol. 3(2), pages 97-110, April.
    14. Breitmoser, Yves & Vorjohann, Pauline, 2013. "Efficient structure of noisy communication networks," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 396-409.
    15. Hellmann, Tim & Staudigl, Mathias, 2014. "Evolution of social networks," European Journal of Operational Research, Elsevier, vol. 234(3), pages 583-596.
    16. Christophe Bravard & Sudipta Sarangi & PHILIPP MÖHLMEIER & AGNIESZKA RUSINOWSKA & EMILY TANIMURA, 2016. "A Degree-Distance-Based Connections Model with Negative and Positive Externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(2), pages 168-192, April.
    17. Buechel Berno, 2009. "Network Formation with Closeness Incentives," Lecture Notes in Economics and Mathematical Systems, in: Ahmad K. Naimzada & Silvana Stefani & Anna Torriero (ed.), Networks, Topology and Dynamics, pages 95-109, Springer.
    18. Erol, Selman & Vohra, Rakesh, 2022. "Relationship externalities," Journal of Economic Theory, Elsevier, vol. 206(C).
    19. Olaizola, By Norma & Valenciano, Federico, 2021. "Efficiency and stability in the connections model with heterogeneous nodes," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 490-503.
    20. 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.
    21. Berno Buechel & Tim Hellmann, 2012. "Under-connected and over-connected networks: the role of externalities in strategic network formation," Review of Economic Design, Springer;Society for Economic Design, vol. 16(1), pages 71-87, March.
    22. Tim Hellmann & Berno Buechel, 2009. "Under-connected and Over-connected Networks," Working Papers 2009.38, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Network Formation; Concave Benefits; Two-Way Flow Model;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:0816. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marina Muilwijk (email available below). General contact details of provider: https://edirc.repec.org/data/eiruunl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.