Network Formation with Endogenous Link Strength and Decreasing Returns to Investment

Games

Chiu Ki So¹ 

[1] Department of Economics and Finance, Hang Seng Management College, Shatin, Hong Kong;

关键词: network formation;    endogenous link strength;    decreasing returns;    small-world network;   

DOI  :  10.3390/g7040040

来源: DOAJ

【 摘 要 】

We study the formation of networks where agents choose how much to invest in each relationship. The benefit that an agent can derive from a network depends on the strength of the direct links between agents. We assume that the strength of the direct link between any pair of agents is a concave function of their investments towards each other. In comparison with some existing models of network formation where the strength technology is a convex function of investment, we find that (i) the symmetric complete network can dominate the star architecture in terms of total utility; (ii) a dominating symmetric complete network needs not be stable; and, (iii) star and complete networks can be dominated by small-world networks.

【 授权许可】

Unknown