Endogenous Correlated Network Dynamics

Frank Page, Rui Gong () and Myrna Wooders
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Rui Gong: Indiana University

No 16-00007, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: We model the structure and strategy of social interactions prevailing at any point in time as a directed network and address the following question: given the rules of network and coalition formation, preferences of individuals over networks, strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emergence and persist. We formulate the problemas a dynamic, stochastic game and v equilibrium (in network and coalition formation strategies), (ii) together with the trembles of nature, this correlated stationary equilibrium determines an equilibrium Markov process of network and coalition formation, and (iii) this endogenous Markov process possesses a finite set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. Moreover, we extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996) and the path dominance core (Page Wooders, 2009a). We show that in order for any network-coalition pair to emerge and persist, it is necessary that the pair reside in one of finitely many basins of attraction. The results we obtain here build on Page and Wooders (2009a)and the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).

Keywords: KEYWORDS: games of network formation; stationary Markov correlated equilibrium; equilibrium Markov process of network formation; basins of attraction; Harris decomposition; ergodic probability measures; dynamic path dominance core; dynamic pairwise stability. (search for similar items in EconPapers)
JEL-codes: C6 C7 (search for similar items in EconPapers)
Date: 2016-03-13
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic, nep-net and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Endogenous correlated network dynamics (2015)
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