Social Network Formation and Strategic Interaction in Large Networks

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This paper presents a bilateral network formation model that explains why some empirical degree distributions exhibit the increasing hazard rate property (IHRP). In my model, a sequentially arriving node forms a link with an existing node through a bilateral agreement. This newborn node prefers a highly linked node; however, the more links an existing node have, the more the marginal return from an additional link diminishes. I prove that the IHRP emerges if and only if the latter effect prevails over the former. I provide two implications of the IHRP. First, I show that the IHRP is related to the existence of equilibria in network games with strategic complementarities. Second, I fit the model to empirical degree distributions and demonstrate that the IHRP is more likely to be observed in social and economic networks. For those networks, my model also exhibits a higher data-fitting performance than other distributions.
Publisher
ELSEVIER
Issue Date
2021-05
Language
English
Article Type
Article
Citation

MATHEMATICAL SOCIAL SCIENCES, v.111, pp.34 - 54

ISSN
0165-4896
DOI
10.1016/j.mathsocsci.2021.01.006
URI
http://hdl.handle.net/10203/285803
Appears in Collection
MT-Journal Papers(저널논문)
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