Communication Network Formation with Link Specificity and Value Transferability

Marjolein Harmsen - van Hout (), P. Jean-Jacques Herings and Benedict Dellaert

No 15/2010, FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)

Abstract: We propose a model on strategic formation of communication networks with (i) link specificity: the more direct links somebody maintains, the less she can specify her attention per link, the lower her links’ value, while this negative externality was previously ignored in the communication context, and (ii) value transferability via indirect links for informational but not for social value from communication, while this positive externality was modeled uniformly before. Assuming only social value to isolate the impact of link specificity, the pairwise stable set includes many nonstandard networks under high or particular combinations of fully connected components under low link specificity. Allowing for social and informational value, the joint effect of link specificity and value transferability reduces the stable set to certain fragmented networks under high or the complete network under low link specificity. These extremes are beneficial for efficiency, whereas quite inefficient networks may arise for intermediate link specificity.

Keywords: Bilateral communication links; Link specificity; Value transferability; Social vs. informational value; Strategic network formation (search for similar items in EconPapers)
JEL-codes: A14 C79 D85 M31 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-11, Revised 2011-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Communication network formation with link specificity and value transferability (2013)
Working Paper: Communication network formation with link specificity and value transferability (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:fcnwpa:2010_015

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