Local Network Effects and Network Structure
This paper presents a model of local network effects in which agents connected in a social network each value adoption by a heterogeneous subset of others, and have incomplete information about the structure and strength of adoption complementarities between all other agents. I show that the symmetric Bayes-Nash equilibria of a general adoption game are in monotone strategies, can be strictly Pareto-ranked, and that the greatest equilibrium is uniquely coalition-proof. Each Bayes-Nash equilibrium has a corresponding fulfilled-expectations equilibrium under which agents form local-adoption expectations. Examples analyze three special cases including a standard model with completely connected agents, and characterize the distributions of equilibrium networks of adopters when the social network is an instance of a generalized random graph.
|Date of creation:||19 Dec 2004|
|Note:||Type of Document - pdf; pages: 38. Model of adoption of a good by strategic nodes in a random graph.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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