A Variational Approach to Network Games
Emerson Melo (Indiana University – Department of Economics)
C72, D85, H41, C61, C62
Network Games, Variational Inequalities, Lowest Eigenvalue, Shock Propagation
Economic Theory and Applications
This paper studies strategic interaction in networks. We focus on games of strategic substitutes and strategic complements, and departing from previous literature, we do not assume particular functional forms on players’ payoffs. By exploiting variational methods, we show that the uniqueness, the comparative statics, and the approximation of a Nash equilibrium are determined by a precise relationship between the lowest eigenvalue of the network, a measure of players’ payoff concavity, and a parameter capturing the strength of the strategic interaction among players. We apply our framework to the study of aggregative network games, games of mixed interactions, and Bayesian network games.
Suggested citation: Melo, E., (2017), ‘A Variational Approach to Network Games ‘, Nota di Lavoro 5.2018, Milano, Italy: Fondazione Eni Enrico Mattei