We consider game theoretic models of social network formation.In this paper we limit our investigation to game theoretic models of network formation that are based on individual actions only.Our approach is based on three simple and realistic principles: (1) Link formation is a binary process of consent.(2) Link formation is costly.(3) The class of network payo functions should be as general as possible.We provide characterizations of stable networks under the hypothesis of mutual consent in the cases of two-sided and one-sided link formation costs. Furthermore, we introduce a new equilibrium concept based on a limited, realistic form of farsightedness or "trust" in network formation.
|Place of Publication||Tilburg|
|Number of pages||36|
|Publication status||Published - 2003|
|Name||CentER Discussion Paper|
- game theory
- general equilibrium