International Journal of Game Theory

, Volume 45, Issue 3, pp 497–509

Strategic complementarities, network games and endogenous network formation

Article

DOI: 10.1007/s00182-015-0466-x

Cite this article as:
Lagerås, A. & Seim, D. Int J Game Theory (2016) 45: 497. doi:10.1007/s00182-015-0466-x

Abstract

This paper investigates the role of strategic complementarities in the context of network games and network formation models. In the general model of static games on networks, we characterize conditions on the utility function that ensure the existence and uniqueness of a pure-strategy Nash equilibrium, regardless of the network structure. By applying the game to empirically-relevant networks that feature nestedness—Nested Split Graphs—we show that equilibrium strategies are non-decreasing in the degree. We extend the framework into a dynamic setting, comprising a game stage and a formation stage, and provide general conditions for the network process to converge to a Nested Split Graph with probability one, and for this class of networks to be an absorbing state. The general framework presented in the paper can be applied to models of games on networks, models of network formation, and combinations of the two.

Keywords

Social networks Network formation Social interaction 

Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Department of MathematicsStockholm UniversityStockholmSweden
  2. 2.Department of EconomicsUniversity of TorontoTorontoCanada
  3. 3.The Research Institute for Industrial EconomicsStockholmSweden

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