Network Game with Production and Knowledge Externalities

Vladimir D. Matveenko; Alexei V. Korolev

Authors

Vladimir D. Matveenko National Research University Higher School of Economics
Alexei V. Korolev National Research University Higher School of Economics

Abstract

We consider a game equilibrium in a network in each node of which an economy is described by the simple two-period model of endogenous growth with production and knowledge externalities. Each node of the network obtains an externality produced by the sum of knowledge in neighbor nodes. Uniqueness of the inner equilibrium is proved. Three ways of behavior of each agent are distinguished: active, passive, hyperactive. Behavior of agents in dependence on received externalities is studied. It is shown that the equilibrium depends on the network structure. We study the role of passive agents; in particular, possibilities of connection of components of active agents through components of passive agents. A notion of type of node is introduced and classification of networks based on this notion is provided. It is shown that the inner equilibrium depends not on the size of network but on its structure in terms of the types of nodes, and in similar networks of different size agents of the same type behave in similar way.

Keywords:

network, structure of network, network game, Nash equilibrium, externality, network formation

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