Strategic information dissemination and link formation in social networks

In this paper, we propose a novel game-theoretic framework for analyzing and understanding how strategic networks are formed endogenously, driven by the self-interested decisions of individual agents aiming to maximize their own utilities by trading-off the costs and benefits of forming links with other agents. We explicitly model and analyze the scenario in which agents benefit from disseminating their own information to other agents. We rigorously prove that the equilibria of strategic networks frequently exhibit a core-periphery structure, where there are only few agents at the center (core) of the network while the majority of agents are at the periphery of the network and communicate with other agents via links maintained by the “core” agents, who play the role of “connectors” in the network. Also, we are able to determine under what conditions the strategic networks operating in equilibrium are minimally connected (i.e. there is a unique path between any two agents) and have short network diameters. These properties are commonly observed on the Internet and important because they ensure the efficiency and robustness of the resulting equilibrium networks. However, none of these has been rigorously proven in a formal framework before.