Network Cycles and Welfare

14 Pages Posted: 30 Oct 2017 Last revised: 7 Nov 2017

See all articles by Eduard Talamàs

Eduard Talamàs

IESE Business School

Omer Tamuz

California Institute of Technology - Division of the Humanities and Social Sciences

Date Written: November 3, 2017

Abstract

In a wide variety of social settings (e.g. crime, education, political activism, technology adoption), players’ returns to their efforts depend on how much effort others exert. Modeling these situations as a network game with strategic complementarities, we show that a player’s cycle centrality — a weighted sum of the number of network cycles that she is in — determines the extent to which she benefits from her complementarities with others. In contrast to the widely-used Bonacich centrality — which measures how efforts propagate through the network — cycle centrality measures how the variance of efforts propagates through the network. A utilitarian social planner who can incentivize one player’s effort targets the one with the highest cycle centrality.

Keywords: Strategic complementarities, social networks, Nash equilibrium, centrality, cycles, welfare

JEL Classification: C72, D85, H41, K42, L14, O33

Suggested Citation

Talamàs, Eduard and Tamuz, Omer, Network Cycles and Welfare (November 3, 2017). Available at SSRN: https://ssrn.com/abstract=3059604 or http://dx.doi.org/10.2139/ssrn.3059604

Eduard Talamàs (Contact Author)

IESE Business School ( email )

Arnús i Garí, 3-7
Barcelona, Philadelphia 08034
Spain

Omer Tamuz

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

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