Open AccessSocial activity and network formation
Author(s) -
Baetz Oliver
Publication year - 2015
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te1487
Subject(s) - network formation , hierarchy , mathematical economics , function (biology) , microeconomics , graph , social network (sociolinguistics) , simple (philosophy) , multipartite , economics , mathematics , combinatorics , computer science , biology , evolutionary biology , philosophy , epistemology , world wide web , social media , market economy , physics , quantum mechanics , quantum entanglement , quantum
This paper develops a simple model in which a social hierarchy emerges endogenously when agents form a network for complementary interaction (“activity”). Specifically, we assume that agents are ex ante identical and their best response activity, as well as their value function, increases (strictly) concavely in the total activity of their neighbors in the network. There exists a unique and stable positive activity equilibrium on exogenous networks under mild conditions. When we endogenize network formation, equilibria become strongly structured: more active players have more neighbors, i.e., a higher degree, but tend to sponsor fewer links. Additionally, in strict equilibria, agents separate themselves into groups characterized by the symmetric activity of their members. The characteristic activity decreases in group size and the network is a complete multipartite graph.