A strategic model of complex networks formation.

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.Strategic Network Formation, Pairwise Stability, Small World, Monte Carlo.