Network Formation with Sequential Demands

Sergio Currarini (sc526@le.ac.uk) and Massimo Morelli (massimo.morelli@unibocconi.it)

No 99/2, Royal Holloway, University of London: Discussion Papers in Economics from Department of Economics, Royal Holloway University of London

Abstract: This paper introduces a non-cooperative game-theoretic model of sequential network formation, in which players propose links and demand payoffs. Payoff division is therefore endogenous. We show that if the value of networks satisfies size-monotonicity, then each and every equilibrium network is efficient. Formation of networks satisfies size-monotonicity, then each and equilibrium network is efficient. Formation of networks through bilateral every negotiations (link-specific demands) and through absolute participation demands turn out to have the same efficiency properties. The result do not extend to the case in which players can only demand relative shares

Keywords: Link Formation; Efficient Networks; Graphs; Payoff Division (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2000-02, Revised 2000-02
New Economics Papers: this item is included in nep-evo, nep-net and nep-reg
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