Networks with Decreasing Returns to Linking

56 Pages Posted: 12 May 2010

Date Written: November 13, 2009

Abstract

This paper presents a model of non-cooperative network formation in which the marginal benefit of new links eventually decreases. Agents link with each other to gain information and update their links according to better-reply dynamics. In the long run the system settles to a unique network architecture that consists of a constellation of starred wheels. This is reminiscent of some real-world features. Collections of smaller disjoint networks connecting only a few agents are more common than global networks connecting all the agents in a community. Differences within a connected component such as the centre and the periphery are established.

Keywords: networks, coordination, learning dynamics, non-cooperative games

JEL Classification: C72, D83, D85

Suggested Citation

Vergara Caffarelli, Filippo, Networks with Decreasing Returns to Linking (November 13, 2009). Bank of Italy Temi di Discussione (Working Paper) No. 734, Available at SSRN: https://ssrn.com/abstract=1601927 or http://dx.doi.org/10.2139/ssrn.1601927

Filippo Vergara Caffarelli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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