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Clustering in network games

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  • Ruiz-Palazuelos, Sofía

Abstract

In many circumstances, behavior and well-being of people depend on the actions taken by their social contacts. Previous research has mainly studied how individuals’ choices are shaped by their number of connections, while the incidence that other features of their social networks have on their behavior has been understudied. This paper analyzes the role of network clustering in Bayesian games of strategic substitutes and strategic complements played on networks, which reflect for instance public good provision and technology adoption, respectively. In our framework, players have incomplete information about the interaction network that includes the number of triads in the network — information labeled as perceived clustering throughout the paper. We show that equilibrium actions are non-decreasing (non-increasing) in perceived clustering under strategic substitutes (complements). Greater perceived clustering thus increases public good provision and reduces the adoption of complementary technologies in the Bayesian equilibria.

Suggested Citation

  • Ruiz-Palazuelos, Sofía, 2021. "Clustering in network games," Economics Letters, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521001993
    DOI: 10.1016/j.econlet.2021.109922
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    References listed on IDEAS

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    1. Matthew O. Jackson & Tomas Rodriguez-Barraquer & Xu Tan, 2012. "Social Capital and Social Quilts: Network Patterns of Favor Exchange," American Economic Review, American Economic Association, vol. 102(5), pages 1857-1897, August.
    2. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
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    Cited by:

    1. Ruiz Palazuelos, Sofía, 2021. "Network Perception in Network Games," MPRA Paper 115212, University Library of Munich, Germany, revised 21 Jun 0022.
    2. Li, Dandan & Sun, Xiaoxiao & He, Youxin & Han, Dun, 2022. "On prisoner’s dilemma game with psychological bias and memory learning," Applied Mathematics and Computation, Elsevier, vol. 433(C).

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    More about this item

    Keywords

    Networks; Network games; Clustering; Incomplete information; Network closure; Graphical games;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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