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Directed Networks with Spillovers

Authors


  • Pascal Billand, Department of Economics, University of Lyon-Saint Etienne, Bâtiment D, 6 rue Basse des Rives, 42023 Saint Etienne, France (pascal.billand@univ-st-etienne.fr). Christophe Bravard, Department of Economics, University of Lyon-Saint Etienne, Bâtiment D, 6 rue Basse des Rives, 42023 Saint Etienne, France (christophe.bravard@univ-st-etienne.fr). Sudipta Sarangi, DIW Berlin and Department of Economics, Louisiana State University, 110 Thomas Boyd, Baton Rouge, LA 70803, United States (sarangi@lsu.edu).

Abstract

We study noncooperative network formation in two types of directed networks. In the first type, called the model with global spillovers, the payoff of a player depends on the number of links she forms as well as the total number of links formed by all other players. In the second type, called the model with local spillovers, the payoff of a player depends on the number of links she forms and the total number of links formed by her immediate neighbors, as well as the number of links formed by players outside her neighborhood. For both classes of games we investigate the existence of pure strategy Nash equilibria and characterize the Nash networks under a number of different second order conditions on the payoff function.

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