We analyze whether random network formation processes, such as preferential attachment, can emerge as the outcome of strategic behaviour. We represent network formation as an extensive game in which players sequentially form links as they enter the network. In this setting, we investigate under which conditions subgame perfect equilibria of the game are observationally equivalent with random network formation process. We put forward two structural conditions that are necessary in this respect. First, players must have some form of imperfect information as randomization is purposeful only if its realization is not perfectly observed by the other players. Second, there must be some form of competition between a player and its successors: a player has incentives to reduce the information available to its successors only to the extent that their objectives are in opposition. Accordingly, we put forward a class of games where players compete with their predecessors and their successors for the costs and benefits induced by link formation and show that subgame perfect equilibria of this game are observationally equivalent with random network formation process. In particular, when linkage costs are inversely proportional to the degree of a node, equilibrium play induces a preferential attachment process. This provides a positive answer to the question of the existence of strategic foundations for preferential attachment. However the very specific conditions required for the observational equivalence to hold suggest that preferential attachment can be explained by strategic considerations only in a limited number of situations.

Sequential competition and the strategic origins of preferential attachment / Mandel, Antoine; Venel, Xavier Mathieu Raymond. - In: INTERNATIONAL JOURNAL OF GAME THEORY. - ISSN 0020-7276. - 51:3-4(2022), pp. 483-508. [10.1007/s00182-021-00801-0]

Sequential competition and the strategic origins of preferential attachment

Venel, Xavier
2022

Abstract

We analyze whether random network formation processes, such as preferential attachment, can emerge as the outcome of strategic behaviour. We represent network formation as an extensive game in which players sequentially form links as they enter the network. In this setting, we investigate under which conditions subgame perfect equilibria of the game are observationally equivalent with random network formation process. We put forward two structural conditions that are necessary in this respect. First, players must have some form of imperfect information as randomization is purposeful only if its realization is not perfectly observed by the other players. Second, there must be some form of competition between a player and its successors: a player has incentives to reduce the information available to its successors only to the extent that their objectives are in opposition. Accordingly, we put forward a class of games where players compete with their predecessors and their successors for the costs and benefits induced by link formation and show that subgame perfect equilibria of this game are observationally equivalent with random network formation process. In particular, when linkage costs are inversely proportional to the degree of a node, equilibrium play induces a preferential attachment process. This provides a positive answer to the question of the existence of strategic foundations for preferential attachment. However the very specific conditions required for the observational equivalence to hold suggest that preferential attachment can be explained by strategic considerations only in a limited number of situations.
2022
Game theory, Socio-economic networks, Endogenous network formation, Preferential attachment, Extensive games
Sequential competition and the strategic origins of preferential attachment / Mandel, Antoine; Venel, Xavier Mathieu Raymond. - In: INTERNATIONAL JOURNAL OF GAME THEORY. - ISSN 0020-7276. - 51:3-4(2022), pp. 483-508. [10.1007/s00182-021-00801-0]
File in questo prodotto:
File Dimensione Formato  
Mandel_preferential_attachment.pdf

Solo gestori archivio

Tipologia: Versione dell'editore
Licenza: Tutti i diritti riservati
Dimensione 431.22 kB
Formato Adobe PDF
431.22 kB Adobe PDF   Visualizza/Apri
Pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11385/215835
Citazioni
  • Scopus 1
  • ???jsp.display-item.citation.isi??? 2
social impact