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An allocation rule for dynamic random network formation processes

Author

Listed:
  • Jean-François Caulier
  • Michel Grabisch
  • Agnieszka Rusinowska
Abstract
Most allocation rules for network games presented in the literature assume that the network structure is fixed. We put explicit emphasis on the construction of networks and examine the dynamic formation of networks whose evolution across time periods is stochastic. Time series of networks are studied that describe processes of network formation where links may appear or disappear at any period. Moreover, convergence to an efficient network is not necessarily prescribed. Transitions from one network to another are random and ruled by a stochastic process, typically a Markov chain. We propose the link-based scenario allocation rule for such dynamic random network formation processes and provide its axiomatic characterization. By considering a monotone game and a particular (natural) network formation process, we recover the link-based flexible network allocation rule of Jackson (Games Econ Behav 51:128–154, 2005a ). Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Jean-François Caulier & Michel Grabisch & Agnieszka Rusinowska, 2015. "An allocation rule for dynamic random network formation processes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 283-313, October.
    • Handle: RePEc:spr:joecth:v:60:y:2015:i:2:p:283-313
    DOI: 10.1007/s00199-015-0879-6
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    More about this item

    Keywords

    Dynamic networks; Network game; Link-based allocation rule; Markov chain; Characterization; C71; D85;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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