Dynamic network formation with farsighted players and limited capacities

Michel Grabisch, Elena Parilina, Agnieszka Rusinowska () and Georges Zaccour
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Elena Parilina: SPBU - Saint Petersburg State University
Agnieszka Rusinowska: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris
Georges Zaccour: HEC Montréal - HEC Montréal, GERAD - Groupe d’études et de recherche en analyse des décisions - EPM - École Polytechnique de Montréal - McGill University = Université McGill [Montréal, Canada] - HEC Montréal - HEC Montréal - UQAM - Université du Québec à Montréal = University of Québec in Montréal

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We investigate a T-stage dynamic network formation game with linear-quadratic payoffs. Players interact through network which they create as a result of their actions. We study two versions of the dynamic game and provide the equilibrium analysis. First, we assume that players sequentially propose links to others with whom they want to connect and choose the levels of contribution for their links. The players have limited total contributions or capacities for forming links at every stage which can differ among players and over time. They cannot delete links, but the principle of natural elimination of links with no contribution is adopted. Next, we assume that the players simultaneously and independently propose links to other players and have overall limited capacities for the whole game, and not for each stage. This means that every player can redistribute the capacity not only over links, but also over time. The equilibrium concept for the first version of the dynamic game is subgame perfect equilibrium, while it is the Nash equilibrium in open-loop strategies for the second version. Both models are illustrated with numerical examples.

Date: 2026-04
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Published in Journal of Economic Dynamics and Control, 2026, 185, pp.105285. ⟨10.1016/j.jedc.2026.105285⟩

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Related works:
Working Paper: Dynamic network formation with farsighted players and limited capacities (2026)
Working Paper: Dynamic Network Formation with Farsighted Players and Limited Capacities (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-05507691

DOI: 10.1016/j.jedc.2026.105285

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