%0 Journal Article %1 Bal-00 %A Bala, Venkatesh %A Goyal, Sanjeev %D 2000 %J Econometrica %K Coordination Learning Networks Noncooperative and dynamics games %N 5 %P 1181--1229 %T A Noncooperative Model of Network Formation %V 68 %X We present an approach of network formation based on the notion that social networks are formed by individual decision that trade off the costs of forming and maintaining links against the costs of forming and maintaining links against the potential rewards from doing so. We suppose that a link with another agent allows access, in part and in de course, to the benefits available to the benefits available by the latter via its own links.This individual links generate externalities whose value depends on the level of decay or delay associated with indirect links. A distinctinvee aspect of our approach is that the cost of link formation are incurrend only by the person who initiates the link. This allows us to formulate the network formation process as a noncooperative game. We first provide a characterization of the architecture of equilibrium networks. We then study the dynamics of network formation. We find that individual efforts to access benefits affered by others lead, rapidly, to the emergence of an equilibrium social network, under a variety of circumstances. The limiting networks have simple architectures, e.g., the wheel, the star, or generalizations of these networks. In many cases, such networks are also socially efficient.

@article{Bal-00, abstract = {We present an approach of network formation based on the notion that social networks are formed by individual decision that trade off the costs of forming and maintaining links against the costs of forming and maintaining links against the potential rewards from doing so. We suppose that a link with another agent allows access, in part and in de course, to the benefits available to the benefits available by the latter via its own links.This individual links generate externalities whose value depends on the level of decay or delay associated with indirect links. A distinctinvee aspect of our approach is that the cost of link formation are incurrend only by the person who initiates the link. This allows us to formulate the network formation process as a noncooperative game. We first provide a characterization of the architecture of equilibrium networks. We then study the dynamics of network formation. We find that individual efforts to access benefits affered by others lead, rapidly, to the emergence of an equilibrium social network, under a variety of circumstances. The limiting networks have simple architectures, e.g., the wheel, the star, or generalizations of these networks. In many cases, such networks are also socially efficient.}, added-at = {2008-03-13T16:33:57.000+0100}, author = {Bala, Venkatesh and Goyal, Sanjeev}, biburl = {https://www.bibsonomy.org/bibtex/20a81df50bf10a679ce485a35dedc8864/bertil.hatt}, date-added = {2007-06-11 17:22:07 +0200}, date-modified = {2008-02-07 02:22:24 +0100}, description = {March 2008}, interhash = {cfc003b1f648fb53e95a8094ccbc6d5f}, intrahash = {0a81df50bf10a679ce485a35dedc8864}, journal = {Econometrica}, keywords = {Coordination Learning Networks Noncooperative and dynamics games}, number = 5, pages = {1181--1229}, rating = {0}, timestamp = {2008-03-13T16:34:05.000+0100}, title = {A Noncooperative Model of Network Formation}, uri = {papers://C3B117CD-23C4-4854-9426-AC96AFB113DA/Paper/p52}, volume = 68, year = 2000 }