How robust are the stars?: Network formation under shock and group effects

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Thesis Type: Postgraduate

Institution Of The Thesis: Galatasaray Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat, Turkey

Approval Date: 2017

Thesis Language: English

Student: DENİZ ÖZBAŞ

Supervisor: BİLGE ÖZTÜRK GÖKTUNA

Open Archive Collection: AVESIS Open Access Collection

Abstract:

Bala and Goyal (2000) model which investigated formation of non-cooperative network demonstrates that the empty networks and the wheel in the one-way flow of benefit model, and the center-sponsored star in the two-way flow of benefit model are strict Nash equilibria of their game. Experimental study of Falk and Kosfeld (2003) show that the predictions based on (strict) Nash equilibrium of Bala and Goyal work well in the one-way flow model whereas they largely fail in the two-way flow model. Goeree et al. (2009), on the other hand, indicate that introduction of heterogeneous agents to the model provides star-shaped networks in two-way flow model. The first purpose is to observe star-shaped networks and then to measure the robustness of stars against two effects: shock effect and group effect. In this context, existing literature is contributed by introduction of the concept of star robustness and two effects which force the star robustness: shock effect and group effect. The results show that shock effect and group effect perform against the star robustness through two different planes: horizontal and vertical respectively.