Strategic Interaction and Networks

Yann Bramoullé, Rachel Kranton and Martin D'Amours

Cahiers de recherche from CIRPEE

Abstract: This paper brings a general network analysis to a wide class of economic games. A network, or interaction matrix, tells who directly interacts with whom. A major challenge is determining how network structure shapes overall outcomes. We have a striking result. Equilibrium conditions depend on a single number: the lowest eigenvalue of a network matrix. Combining tools from potential games, optimization, and spectral graph theory, we study games with linear best replies and characterize the Nash and stable equilibria for any graph and for any impact of players’ actions. When the graph is sufficiently absorptive (as measured by this eigenvalue), there is a unique equilibrium. When it is less absorptive, stable equilibria always involve extreme play where some agents take no actions at all. This paper is the first to show the importance of this measure to social and economic outcomes, and we relate it to different network link patterns.

Keywords: Networks; potential games; lowest eigenvalue; stable equilibria; asymmetric equilibria (search for similar items in EconPapers)
JEL-codes: C72 D00 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-gth, nep-net and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.cirpee.org/fileadmin/documents/Cahiers_2010/CIRPEE10-18.pdf (application/pdf)

Related works:
Journal Article: Strategic Interaction and Networks (2014)
Working Paper: Strategic Interaction and Networks (2014)
Working Paper: Strategic Interaction and Networks (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:1018

Access Statistics for this paper

More papers in Cahiers de recherche from CIRPEE Contact information at EDIRC.
Bibliographic data for series maintained by Manuel Paradis ().