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Strategic analysis in complex networks with local externalities

Galeotti, Andrea and Vega-Redondo, Fernando (2005) Strategic analysis in complex networks with local externalities. Social Science Working Paper, 1224. California Institute of Technology , Pasadena, CA. (Unpublished)

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In this paper, we discuss a model with local positive externalities on a complex random network that allows for wide heterogeneities among the agents. The situation can be analyzed as a game of incomplete information where each player’s connectivity is her type. We focus on three paradigmatic cases in which the overall degree distribution is Poisson, exponential, and scale-free (given by a power law). For each of them, we characterize the equilibria and obtain interesting insights on the interplay between network topology and payoffs. For example, we reach the somewhat paradoxical conclusion that a broad degree distribution or/and too low a cost of effort render it difficult, if not impossible, to sustain an (efficient) high-effort configuration at equilibrium.

Item Type:Report or Paper (Working Paper)
Group:Social Science Working Papers
Subject Keywords:complex networks, local externalities
Series Name:Social Science Working Paper
Issue or Number:1224
Classification Code:JEL: C72, D82, D89
Record Number:CaltechAUTHORS:20170808-155344395
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79976
Deposited By: Hanna Storlie
Deposited On:09 Aug 2017 17:00
Last Modified:03 Oct 2019 18:26

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