Network formation with decreasing marginal benefits of information
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.
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- Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 319-349, October.
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"Network Formation with Heterogeneous Players,"
Economics Discussion Papers
2996, University of Essex, Department of Economics.
- Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
- Buechel, Berno, 2011. "Network formation with closeness incentives," Center for Mathematical Economics Working Papers 395, Center for Mathematical Economics, Bielefeld University.
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