Cookies?
Library Header Image
LSE Research Online LSE Library Services

Endogenous correlated network dynamics

Gong, Rui and Page, Frank and Wooders, Myrna (2015) Endogenous correlated network dynamics. SRC Discussion Paper (No 39). Systemic Risk Centre, The London School of Economics and Political Science, London, UK.

[img]
Preview
Text - Published Version
Download (921kB) | Preview

Abstract

We model the structure and strategy of social interactions prevailing at any point in time as a directed network and we address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, preferences of individuals over networks, strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emerge and persist. Our main contributions are to formulate the problem of network and coalition formation as a dynamic, stochastic game and to show that: (i) the game possesses a correlated stationary Markov equilibrium (in network and coalition formation strategies), (ii) together with the trembles of nature, this correlated stationary equilibrium determines an equilibrium Markov process of network and coalition formation, and (iii) this endogenous Markov process possesses a finite set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. Moreover, we extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996) and the path dominance core (Page-Wooders, 2009a). We show that in order for any network-coalition pair to emerge and persist, it is necessary that the pair reside in one of finitely many basins of attraction. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earlier results on endogenous network formation and strategic basins of attraction in static, abstract games of network formation (Page and Wooders, 2009a), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).

Item Type: Monograph (Discussion Paper)
Official URL: http://www.systemicrisk.ac.uk/
Additional Information: © 2015 The Authors
Divisions: Systemic Risk Centre
Subjects: H Social Sciences > HB Economic Theory
JEL classification: A - General Economics and Teaching > A1 - General Economics > A14 - Sociology of Economics
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C71 - Cooperative Games
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
Sets: Research centres and groups > Systemic Risk Centre
Date Deposited: 21 Jan 2016 14:42
Last Modified: 12 Dec 2017 08:08
Projects: ES/K002309/1
Funders: ESRC
URI: http://eprints.lse.ac.uk/id/eprint/65098

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics