Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2002-07-10
Number: 02-069/1
Author-Name: Andrea Galeotti
Author-Email: galeotti@few.eur.nl
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Sanjeev Goyal
Author-Email: s.goyal@qmul.ac.uk
Author-Workplace-Name: University of London, and Erasmus University Rotterdam
Title: Network Formation with Heterogeneous Players
Abstract: This paper studies network formation in settings where players are heterogeneous with respect to benefits as well as the costs of forming links. Our results demonstrate that centrality, center-sponsorship and short network diameter are robust features of equilibrium networks. We find that in a society with many groups, where it is cheaper to connect within groups as compared to across groups, strategic play by individuals leads to a network architecture in which there is a core group which is entirely internally connected while all the other groups are entirely externally linked and hence completely fragmented. Since internal/within group links are cheaper to form, this implies that individual incentives may generate a significant waste of valuable social resources.
Classification-JEL: C72; C79
Keywords: Noncooperative games; Network formation; Heterogeneity
File-Url: https://papers.tinbergen.nl/02069.pdf
File-Format: application/pdf
File-Size: 294921 bytes
Handle: RePEc:tin:wpaper:20020069