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.
(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 language | English |
---|---|
Place of Publication | Utrecht |
Publisher | UU USE Tjalling C. Koopmans Research Institute |
Number of pages | 26 |
Publication status | Published - Jul 2008 |
Publication series
Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
---|---|
No. | 16 |
Volume | 08 |
ISSN (Electronic) | 2666-8238 |
Keywords
- Network Formation
- Concave Benefits
- Two-Way Flow Model