A model of weighted network formation

• 成果类型: Article
• 署名作者: Baumann, Leonie
• 署名单位: McGill University
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1933-6837
• DOI: 10.3982/TE2177
• 发表日期: 2021-01-01
• 页码: 1-23
• 关键词: Weighted networks; network formation; continuous link strength; C70; D85; L14

摘要

This paper proposes a game of weighted network formation in which each agent has a limited resource to form links of possibly different intensities with other agents and to use for private purposes. We show that every equilibrium is either reciprocal or nonreciprocal. In a reciprocal equilibrium, any two agents invest equally in the link between them. In a nonreciprocal equilibrium, agents are partitioned into concentrated and diversified agents, and a concentrated agent is only linked to diversified agents and vice versa. For every link, the concentrated agent invests more in the link than the diversified agent. The unweighted relationship graph of an equilibrium, in which two agents are linked if they both invest positively in each other, uniquely predicts the equilibrium values of each agent's network investment and utility level, as well as the ratio of any two agents' investments in each other. We show that equilibria are not pairwise stable and are not efficient due to the positive externalities of investing in a link.