(Saturday, 1st January 2005)
Economic and social networks play an important role for many economic outcomes. A recent literature considers the strategic foundations to network formation in different economic contexts and relates the performance of economic agents to network structures. We will review in this lecture some major theoretical works in this field. The economic applications are varied and shall be usefully classified into games with positive externalities (communication networks, market sharing agreements, cartels,…), games with negative externalities (R&D networks, free trade agreements), and games mixing the two effects. We will also evocate some recent contributions using the non cooperative approach in the description of social network formation.
Bibliographical references :
Must read reference : Jackson , M. et A. Wolinsky, 1996, A Strategic Model of Economic and Social Networks, Journal of Economic Theory, 71, 44-74.
Bala, V. and S. Goyal, 2000, A Noncooperative Model of Network Formation, Econometrica, 68, 1181-1229.
Belleflamme, P. and F. Bloch, 2004, Market sharing agreements and collusive networks, International Economic Review, 45, 387-411.
Goyal, S. and S. Joshi, 2003, Networks of collaboration in oligopoly, Games and Economic Behavior, 43, 57-85.
Furusawa, T. and H. Konishi, 2003, Free Trade Networks, mimeo Boston College.
Goyal, S. and F. Véga-Redondo, 2004, Structural holes in social networks, mimeo Queen Mary University.