Network formation with decreasing marginal benefits of information

K. de Jaegher, J.J.A. Kamphorst

    Research output: Working paperAcademic

    Abstract

    In the two-way flow connections model of the seminal paper by Bala and Goyal
    (2000a), the marginal benefit of obtaining the information of one more player is
    constant. However, it is plausible that the marginal benefit of such information is
    decreasing. This paper explores the consequences for the stability of networks of such decreasing marginal benefits. We start by characterizing the strict Nash
    networks for both the case of constant and the case of decreasing marginal benefits.
    Using this characterization, we next explore how the set of strict Nash networks
    differs for the two cases. The results and intuition tells us that long diameter
    networks have certain features which make them relatively more likely to be stable under decreasing marginal benefits of information as compared to short diameter networks.
    Original languageEnglish
    Place of PublicationUtrecht
    PublisherUU USE Tjalling C. Koopmans Research Institute
    Number of pages26
    Publication statusPublished - Jul 2008

    Publication series

    NameDiscussion Paper Series / Tjalling C. Koopmans Research Institute
    No.16
    Volume08
    ISSN (Electronic)2666-8238

    Keywords

    • Network Formation
    • Concave Benefits
    • Two-Way Flow Model

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