Dynamics of Networks: If Everyone Strives for Structural Holes

Abstract:     
When entrepreneurs enter structural holes in networks, they can exploit the related benefits. Evidence for these benefits has steadily accumulated. The authors ask whether those who strive for such structural advantages can maintain them if others follow their example. Burt speculates that they cannot, but a formal demonstration of this speculation is lacking. Using a game theoretic model of network formation, the authors characterize the networks that emerge when everyone strives for structural holes. They find that the predominant stable networks distribute benefits evenly, confirming that no one is able to maintain a structural advantage in the long run.

Keywords: network formation, structural holes, game theory

JEL Classification: C72

Accepted Paper Series