Non-Cooperative Network Formation with Network Maintenance Costs

Filippo Vergara Caffarelli

No ECO2004/18, Economics Working Papers from European University Institute

Abstract: This paper presents a model of non-cooperative network formation similar to Bala and Goyal (2000), except that marginal costs in the size of the network is increasing. Agents link among each other to gain information and update their links according to a better reply dynamics. In the long run the system settles in a state that consists of starred-wheel networks. This is reminiscent of some real world features. Collections of smaller disjoint networks connecting few agents are more common than global networks connecting all agents of the community. Di.erences within a connected component such as core and periphery are established.

Keywords: Networks; Coordination; Learning dynamics; Non-cooperative games (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (7)

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