A Study of How the Watts-Strogatz Model Relates to an Economic System’s Utility

Abstract

Watts-Strogatz model is a main mechanism to construct the small-world networks. It is widely used in the simulations of small-world featured systems including economic system. Formally, the model contains a parameters set including three variables representing group size, number of neighbors, and rewiring probability. This paper discusses how the parameters set relates to the economic system performance which is utility growth rate. In conclusion, it is found that, regardless of the group size and rewiring probability, 2 to 18 neighbors can help the economic system reach the highest utility growth rate. Furthermore, given the range of neighbors and group size of a Watts-Strogatz model based system, the range of its edges can be calculated too. By examining the containment relationship between that range and the edge number of an actual equal-size economic system, we could know whether the system structure has redundant edges or can achieve the highest utility growth ratio.