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Network Formation with Heterogeneous Players

Andrea Galeotti () and Sanjeev Goyal
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Andrea Galeotti: Erasmus University Rotterdam

No 02-069/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper studies network formation in settings where players are heterogeneous with respect to benefits as well as the costs of forming links. Our results demonstrate that centrality, center-sponsorship and short network diameter are robust features of equilibrium networks. We find that in a society with many groups, where it is cheaper to connect within groups as compared to across groups, strategic play by individuals leads to a network architecture in which there is a core group which is entirely internally connected while all the other groups are entirely externally linked and hence completely fragmented. Since internal/within group links are cheaper to form, this implies that individual incentives may generate a significant waste of valuable social resources.

Keywords: Noncooperative games; Network formation; Heterogeneity (search for similar items in EconPapers)
JEL-codes: C72 C79 (search for similar items in EconPapers)
Date: 2002-07-10
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Journal Article: Network formation with heterogeneous players (2006) Downloads
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