Working Paper BETA #2006-02

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Title : A strategic model of complex networks formation

Author(s) : Nicolas Carayol, Pascale Roux

Abstract : This paper introduces a spatialized variation of the Connections model of Jackson and Wolinski (1996). Agents benefit from their direct and indirect connections in a communication network. They are arranged on a circle and bear costs for maintaining direct connections which are linearly increasing with geographic distance. In a dynamic setting, this model is shown to generate networks that exhibit the small world properties shared by many real social and economic networks.

Key-words : Strategic Network Formation, Pairwise Stability, Small World, Monte Carlo

JEL Classification :