BEHAVIORAL FOUNDATIONS AND EQUILIBRIUM NOTIONS FOR SOCIAL NETWORK FORMATION PROCESSES

Abstract

This paper develops a framework for studying social network formation. Partly built upon a formalism used in theoretical economics, the network formation process we introduce is locally driven by agents who maximize a given individual payoff function. We examine two simple models and observe the limiting distributions of stochastically stable networks. We find that these networks share some of the features observed for social networks. In particular, we find critical values of the parameters for which the selected networks exhibit small world properties.