A network formation game for the emergence of hierarchies

We propose a novel network formation game that explains the emergence of various hierarchical structures in groups where self-interested or utility-maximizing individuals decide to establish or severe relationships of authority or collaboration among themselves. We consider two settings: we first consider individuals who do not seek the other party’s consent when establishing a relationship and then individuals who do. For both settings, we formally relate the emerged hierarchical structures with the novel inclusion of well-motivated hierarchy promoting terms in the individuals’ utility functions. We first analyze the game via a static analysis and characterize all the hierarchical structures that can be formed as its solutions. We then consider the game played dynamically under stochastic interactions among individuals implementing better-response dynamics and analyze the nature of the converged networks.

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Homophily and Social Norms in Experimental Network Formation Games

Games ◽

10.3390/g9040083 ◽

2018 ◽

Vol 9 (4) ◽

pp. 83

Author(s):

Jasmina Arifovic ◽

Giuseppe Danese

Keyword(s):

Social Norms ◽

Network Formation ◽

Field Studies ◽

The Other ◽

Strategy Formulation ◽

Network Formation Games ◽

Network Formation Game ◽

Profile Rating ◽

Formation Game

Field studies of networks have uncovered a preference to befriend people we perceive as similar according to some dimensions of our identity (“homophily”). Lab studies of network formation games have found that adherence to social norms of reciprocity and inequity aversion are also drivers of network choices. No study so far has attempted to investigate the role of both homophily and social norms in a controlled environment. At the beginning of our experiment, each player fills in a personal profile. Each player then views the profile of all other players and expresses a degree of perceived similarity between his/her profile and the profile of the other player. At this point, a repeated network formation game ensues. We find that: (1) potential homophily considerations triggered by the profile rating task did not measurably change the players’ behavior compared to the baseline; (2) reciprocity plays a significant role in the formulation of the players’ strategies, in particular lowering the probability that the player naively best responds to the network observed in the previous period. We speculate that reciprocation of past choices might be a more “available” aid in strategy-formulation than considerations related to the similarity of the other players.

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Stable Production Networks

International Game Theory Review ◽

10.1142/s021919892040006x ◽

2020 ◽

Vol 22 (02) ◽

pp. 2040006

Author(s):

Manish Sarkhel ◽

Nagarajan Krishnamurthy

Keyword(s):

Network Formation ◽

Industrial Clusters ◽

Network Structures ◽

Production Networks ◽

Network Stability ◽

Second Stage ◽

Stable Production ◽

Network Formation Game ◽

Formation Game ◽

Number Of Firms

One of the key features which promote growth of industrial clusters is collaboration among firms within such clusters. Collaboration among firms leads to the formation of networks. Stability of these networks is vital to the sustainability of the particular firms. In this paper, we model a supply chain network where a set of downstream firms (players) source inputs from upstream firms (players) who manufacture goods, add value to the products and resell them. The upstream firms produce identical goods and compete on quantities to sell these goods to the downstream firms. The upstream firms procure goods from the downstream firms and sell them. Additionally, upstream firms network among themselves so as to reduce their costs. We model this setting as a two-stage [Formula: see text]-player strategic network formation game. Firms decide their links before competing on quantities in the second stage of the game. Using the defined model, we derive equilibrium quantities and profits as a function of the network structure and number of firms. Following which we analyze the conditions under which different stable network emerge. Our analysis brings forth several interesting insights such as higher connections among downstream players lead to increased profits for upstream manufacturers. From the network stability perspective, we obtain the conditions under which regular, star, etc. network structures are pairwise and bilaterally stable. Furthermore, we also find the conditions under which core–periphery network structures emerge and are stable.

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