Electronic Resource
Berkeley, Calif.
:
Berkeley Electronic Press (now: De Gruyter)
The @B.E. journal of theoretical economics
7.2008, 1, art46
ISSN:
1555-0478
Source:
Berkeley Electronic Press Academic Journals
Topics:
Economics
Notes:
This paper presents a model of local network effects in which agents connected 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. I show that the symmetric Bayes-Nash equilibria of this network game are in monotone strategies, can be strictly Pareto-ranked based on a scalar neighbor-adoption probability value, and that the greatest such equilibrium is uniquely coalition-proof. Each Bayes-Nash equilibrium has a corresponding fulfilled-expectations equilibrium under which agents form local adoption expectations. Examples illustrate cases in which the social network is an instance of a Poisson random graph, when it is a complete graph, a standard model of network effects, and when it is a generalized random graph. A generating function describing the structure of networks of adopting agents is characterized as a function of the Bayes-Nash equilibrium they play, and empirical implications of this characterization are discussed.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/bejte/vol7/iss1/art46
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