Social Network Formation with Consent

CentER Discussion Paper No. 2004-70

26 Pages Posted: 5 Jan 2005  

Robert P. Gilles

Queen's University Management School

Sudipta Sarangi

Virginia Polytechnic Institute & State University

Date Written: July 2004

Abstract

We investigate the equilibria of game theoretic models of network formation that are based on individual actions only. Our approach is grounded in three simple and realistic principles: (1) Link formation should be a binary process of consent. (2) Link formation should be costly. (3) The class of network payoff functions should be as general as possible.

It is accepted that these consent models have a very large number of equilibria. However, until now, no characterization of these equilibria has been established in the literature. We aim to fill this void and provide characterizations of stable networks or the cases of two-sided and one-sided link formation costs. Furthermore, we provide a comparison of Nash equilibria with potential maximizers for a certain specification.

Keywords: Game theory, general equilibrium

Suggested Citation

Gilles, Robert P. and Sarangi, Sudipta, Social Network Formation with Consent (July 2004). CentER Discussion Paper No. 2004-70. Available at SSRN: https://ssrn.com/abstract=603341 or http://dx.doi.org/10.2139/ssrn.603341

Robert P. Gilles (Contact Author)

Queen's University Management School ( email )

25 University Sq
Belfast, Northern Ireland BT7 1NN
United Kingdom

Sudipta Sarangi

Virginia Polytechnic Institute & State University ( email )

Blacksburg, VA 24061
United States

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