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Network Formation With Endogenous Decay

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  • Francesco Feri

Abstract

This paper considers a model of economic network characterized by an endogenous architecture and frictions in the relations among agents as described in Bala and Goyal (2000). We propose a similar network model with the difference that frictions in the relations among agents are endogenous. Frictions are modeled as dependent on the result of a coordination game, played by every pair of directly linked agents and characterized by 2 equilibria: one efficient and the other risk dominant. The model has a multiplicity of equilibria and we produce a characterization of those are stochastically stable.

Suggested Citation

  • Francesco Feri, 2007. "Network Formation With Endogenous Decay," Working Papers 2007-14, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2007-14
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    References listed on IDEAS

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    Cited by:

    1. Joost Vandenbossche & Thomas Demuynck, 2013. "Network Formation with Heterogeneous Agents and Absolute Friction," Computational Economics, Springer;Society for Computational Economics, vol. 42(1), pages 23-45, June.
    2. Francesco Feri & Miguel Meléndez-Jiménez, 2013. "Coordination in evolving networks with endogenous decay," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 955-1000, November.
    3. Edoardo Gaffeo & Massimo Molinari, 2018. "A functional perspective on financial networks," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 13(1), pages 51-79, April.

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    More about this item

    Keywords

    Network; Decay; Strategic Interaction;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • D20 - Microeconomics - - Production and Organizations - - - General
    • J00 - Labor and Demographic Economics - - General - - - General

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