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Network Formation with Closeness Incentives

In: Networks, Topology and Dynamics

Author

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  • Buechel Berno

    (Institute of Mathematical Economics, Economic Behavior and Interaction Models)

Abstract

Closeness centrality is an index that has been widely used to assess the strength of an agent's position in a network of relationships. We study the formation of networks in a strategic setting, where every agent tries to optimize his closeness centrality. We investigate how the curvature of the benefit function (decreasing vs. increasing marginal returns) affects the set of stable networks and compare the results to the well-known connections model of Jackson and Wolinsky (JET 71, 1996). It turns out that our model can “replicate” the connections model in the sense that each result is translatable from one model into the other and the sets of stable networks coincide for certain specifications. We conclude that the two models incorporate the same kind of linking behavior and that grouping these “closeness-type” models means a first step in organizing network formation models by the type of incentives.

Suggested Citation

  • Buechel Berno, 2009. "Network Formation with Closeness Incentives," Lecture Notes in Economics and Mathematical Systems, in: Ahmad K. Naimzada & Silvana Stefani & Anna Torriero (ed.), Networks, Topology and Dynamics, pages 95-109, Springer.
    • Handle: RePEc:spr:lnechp:978-3-540-68409-1_4
    DOI: 10.1007/978-3-540-68409-1_4
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    References listed on IDEAS

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    1. Antoni Calvó-Armengol & Rahmi İlkılıç, 2009. "Pairwise-stability and Nash equilibria in network formation," International Journal of Game Theory, Springer;Game Theory Society, vol. 38(1), pages 51-79, March.
    2. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    3. K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.
    4. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    5. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
    6. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 305-318, October.
    7. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 319-349, October.
    8. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
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    Cited by:

    1. Buechel, Berno & Buskens, Vincent, 2011. "The dynamics of closeness and betweenness," Center for Mathematical Economics Working Papers 398, Center for Mathematical Economics, Bielefeld University.
    2. Somayeh Koohborfardhaghighi & Jörn Altmann, 2015. "A Network Formation Model for Social Object Networks," Springer Books, in: Zhenji Zhang & Zuojun Max Shen & Juliang Zhang & Runtong Zhang (ed.), Liss 2014, edition 127, pages 615-625, Springer.
    3. Berno Buechel & Tim Hellmann, 2012. "Under-connected and over-connected networks: the role of externalities in strategic network formation," Review of Economic Design, Springer;Society for Economic Design, vol. 16(1), pages 71-87, March.
    4. repec:use:tkiwps:1616 is not listed on IDEAS
    5. Pramod C. Mane & Nagarajan Krishnamurthy & Kapil Ahuja, 2019. "Formation of Stable and Efficient Social Storage Cloud," Games, MDPI, vol. 10(4), pages 1-17, November.
    6. K. de Jaegher & J.J.A. Kamphorst, 2009. "Two-way Flow Networks with Small Decay," Working Papers 09-34, Utrecht School of Economics.
    7. Somayeh Koohborfardhaghighi & Jorn Altmann, 2016. "How Network Visibility and Strategic Networking Leads to the Emergence of Certain Network Characteristics: A Complex Adaptive System Approach," TEMEP Discussion Papers 2016130, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Aug 2016.
    8. repec:use:tkiwps:3434 is not listed on IDEAS
    9. Somayeh Koohborfardhaghighi & Jorn Altmann, 2016. "How Strategic Networking Impacts the Networking Outcome: A Complex Adaptive System Approach," TEMEP Discussion Papers 2016131, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Aug 2016.
    10. Tim Hellmann & Berno Buechel, 2009. "Under-connected and Over-connected Networks," Working Papers 2009.38, Fondazione Eni Enrico Mattei.
    11. De Jaegher, K. & Kamphorst, J.J.A., 2015. "Minimal two-way flow networks with small decay," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 217-239.
    12. K. de Jaegher & J.J.A. Kamphorst, 2008. "Network formation with decreasing marginal benefits of information," Working Papers 08-16, Utrecht School of Economics.

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