Author's: Giuseppe De Marco
Pages: [59] - [82]
Received Date: December 5, 2008
Submitted by:
A common assumption in the first literature of social network
formation is homogeneity, in the sense that, on one hand, all decision
makers conjecture that others receive information and establish links
of equivalent value, on the other, links can fail independently of
each other with the same probability. However, since empirical
literature shows that ex-ante asymmetries across players arise quite
naturally in reality, recent theoretical literature focuses on the
role of heterogeneity.
In this work, a general kind of heterogeneity is considered in the
framework of one sided two-way flow networks for situations in which
agents do not have an a-priori opinion on the relative importance of
benefits that each player conjectures to get from connections with the
others. Two different models of network formation are here presented,
corresponding to “relative\" or “absolute\" disutility of
establishing direct connections (rd-networks and ad-networks), which
are games with vector valued payoffs. It turns out that, for a certain
class of parameters (low disutility), in the rd-networks the
“two-way connectedness\" and “no cycles” properties characterize
Pareto Nash equilibria while the center sponsored star is
characterized by a refinement of Pareto Nash equilibrium called
“ideal equilibrium”. In the ad-networks, results are substantially
different, in fact, on one hand Pareto Nash characterize only the
“no cycles” property while simple examples show that a Pareto Nash
can be disconnected. On the other hand, “two-way connectedness” is
characterized by a generalization to multicriteria games of the
“friendliness equilibrium” concept, meaning that altruistic
motives increase the level of connectedness of the entire network.
network formation, heterogeneity, multicriteria games, equilibrium refinements.