Shadow links

Manuel Foerster, Ana Mauleon and Vincent Vannetelbosch

No 2018030, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We propose a framework of network formation where players can form two types of links: public links are observed by everyone and shadow links are only observed by neighbors. We introduce a novel solution concept called rationalizable peer-confirming pairwise stability, which generalizes Jackson and Wolinsky (1996)’s pairwise stability notion to accommodate shadow links. We then study the case when public links and shadowlinks are perfect substitutes and relate our concept to pairwise stability. Finally, we consider two specific models and show how false beliefs about others’ behavior may lead to segregation in friendship networks with homophily, reducing social welfare.

Keywords: network formation; peer-confirming beliefs; private information; rationalizability; shadow links; stability (search for similar items in EconPapers)
JEL-codes: A14 C70 D82 D85 (search for similar items in EconPapers)
Date: 2018-10-01
New Economics Papers: this item is included in nep-cdm, nep-gth and nep-mic
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Related works:
Journal Article: Shadow links (2021)
Working Paper: Shadow links (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2018030

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