The Library

Communication networks with endogenous link strength

Tools

Bloch, Francis and Dutta, Bhaskar. (2008) Communication networks with endogenous link strength. Games and Economic Behavior, Vol.66 (No.1). pp. 39-56. ISSN 0899-8256

Preview

PDF
WRAP_Dutta_Communication_Networks.pdf - Draft Version - Requires a PDF viewer.
Download (286Kb)

Official URL: http://dx.doi.org/10.1016/j.geb.2008.03.007

Abstract

This paper analyzes the formation of networks when players choose how much to invest in each relationship. We suppose that players have a fixed endowment that they can allocate across links, and in the baseline model, suppose that link strength is an additively separable and convex function of individual investments, and that agents use the path which maximizes the product of link strengths. We show that both the stable and efficient network architectures are stars. However, the investments of the hub may differ in stable and efficient networks. Under alternative assumptions on the investment technology and the reliability measure, other network architectures can emerge as efficient and stable.

Item Type:

Journal Article

Subjects:

H Social Sciences > HB Economic Theory
H Social Sciences > HM Sociology

Divisions:

Faculty of Social Sciences > Economics

Library of Congress Subject Headings (LCSH):

Social networks -- Economic aspects, Game theory, Endogenous growth (Economics)

Journal or Publication Title:

Games and Economic Behavior

Publisher:

Elsevier

ISSN:

0899-8256

Official Date:

11 April 2008

Dates:

Date	Event
11 April 2008	Published

Volume:

Vol.66

Number:

No.1

Number of Pages:

Page Range:

pp. 39-56

Identifier:

10.1016/j.geb.2008.03.007

Status:

Peer Reviewed

Access rights to Published version:

Open Access

References:

Bala and Goyal, 2000V. Bala and S. Goyal, A noncooperative model of network formation, Econometrica 68 (2000), pp. 1181–1229.
Bloch and Jackson, 2006F. Bloch and M.O. Jackson, Equilibrium definitions in network formation games, Int. J. Game Theory 34 (2006), pp. 305–318.
Boorman, 1975S. Boorman, A combinatorial optimization model for transmission of job information through contact networks, Bell J. Econ. 6 (1975), pp. 216–249.
Bramoulle and Kranton, 2007Y. Bramoulle and R. Kranton, Public goods in networks, J. Econ. Theory 135 (2007), pp. 478–494.
Brueckner, 2003Brueckner J., 2003. Friendship networks. Mimeo. University of Illinois at Urbana Champaign.
Cabrales et al., 2007Cabrales, A., Calvo-Armengol, A., Zenou, Y., 2007. Effort and synergies in network formation. Mimeo. Universidad Carlos III, Universitat Autonoma de Barcelona, IUI Stockholm.
Calvo-Armengol and Jackson, 2004A. Calvo-Armengol and M. Jackson, The effects of social networks on employment and inequality, Amer. Econ. Rev. 94 (2004), pp. 426–454.
Coleman et al., 1966J. Coleman, E. Katz and H. Menzel, Medical Innovation: A Diffusion Study, Bobbs Hill, New York (1966).
Durieu et al., 2004Durieu, J., Haller, H., Solal, P., 2004. Nonspecific networking. Mimeo. Virginia Tech and University of Saint-Etienne.
Dutta and Mutuswami, 1997B. Dutta and S. Mutuswami, Stable networks, J. Econ. Theory 76 (1997), pp. 322–344.
Feri, 2007F. Feri, Stochastic stability in networks with decay, J. Econ. Theory 135 (2007), pp. 442–457.
Gilles and Sarangi, 2004Gilles, R., Sarangi, S., 2004. Social network formation with consent. Mimeo. Virginia Tech and University of Louisiana.
Goyal, 2005S. Goyal, Strong and weak links, J. Europ. Econ. Assoc. 3 (2005), pp. 608–616
Goyal and Moraga Gonzales, 2001S. Goyal and J. Moraga Gonzales, R&D networks, RAND J. Econ. 32 (2001), pp. 686–707.
Goyal et al., in pressGoyal, S., Konovalov, A., Moraga Gonzales, J., in press. Hybrid R&D networks. J. Europ. Econ. Assoc.
Granovetter, 1974M. Granovetter, Getting a job: A Study of Contacts and Careers, Harvard Univ. Press, Cambridge (1974).
Hojman and Szeidl, 2008D. Hojman and A. Szeidl, Core and periphery in networks, J. Econ. Theory 139 (2008), pp. 295–309.
Jackson and Wolinsky, 1996M.O. Jackson and A. Wolinsky, A strategic model of economic and social networks, J. Econ. Theory 71 (1996), pp. 44–74.
Montgomery, 1991I. Montgomery, Social networks and labor market outcomes, Amer. Econ. Rev. 81 (1991), pp. 1408–1418.
Rogers, B., 2005. A strategic theory of network status. Mimeo. MEDS, Northwestern University.