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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/14098
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| Title: | Local Network Effects and Network Structure |
| Authors: | Sundararajan, Arun |
| Issue Date: | Jan-2005 |
| Publisher: | Stern School of Business, New York University |
| Series/Report no.: | CeDER-05-02 |
| Abstract: | This paper presents a model of local network effects in which agents in
a social network each value the adoption of a product by a heterogeneous
subset of other agents in their "neighborhood", and have
incomplete information about the structure and strength of adoption
complementarities between all other agents. It shows that the symmetric
Bayes-Nash equilibria of a general adoption game are in monotone
strategies, can be strictly Pareto-ranked, and the greatest such
equilibrium is uniquely coalition-proof. Each Bayes-Nash equilibrium
has a corresponding fulfilled-expectations equilibrium under which
agents form adoption expectations locally. Examples analyze social
networks that are instances of a generalized random graph, and that are
complete graphs (a standard model of network effects). The structure of
the network of adopting agents is characterized as a function of the
equilibrium played, and empirical implications of this characterization
are discussed. |
| URI: | http://hdl.handle.net/2451/14098 |
| Appears in Collections: | CeDER Working Papers
IOMS: Information Systems Working Papers
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