Network Formation with Multigraphs and Strategic Complementarities

Sumit Joshi, Sudipta Sarangi and Ahmed Mahmud
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Sumit Joshi: George Washington University
Ahmed Mahmud: Johns Hopkins University

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: Economic agents are typically connected to others in multiple network relationships, and the archi- tecture of one network could be shaped by connections in other networks. This paper examines the formation of one network when connections in a second network are inherited under two scenarios: (i) the inherited network is asymmetric allowing for a wide range of graphs called nested split graphs, and (ii) the inherited network is a symmetric type of network belonging to a subclass of regular graphs. Both the inherited and endogenously formed networks are interdependent because the respective actions in each are (weak) strategic complements. This property is su¢ cient to show that those who inherit high centrality will continue to have high centrality. Additionally, the network formed by the agents induces a coarser partition than the inherited network, suggesting the possibility of being able to improve network centrality, but only in a limited manner. Thus, our analysis explains preferential attachment and why inequality is often entrenched in society, how asymmetries in one network may be magniÖed or diminished in another, and what determines the identity of players occupying the various vertices of asymmetric equilibrium networks.

Keywords: Network formation; multigraphs; strategic complementarities; Katz-Bonacich centrality; nested split graphs (search for similar items in EconPapers)
JEL-codes: C72 D85 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic, nep-net and nep-ure
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Related works:
Journal Article: Network formation with multigraphs and strategic complementarities (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2017-27

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