Stochastic stability in one-way flow networks |
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Authors: | Zhiwei Cui Shouyang Wang Jin Zhang Lei Zu |
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Institution: | 1. School of Economics and Management, Beihang University, Beijing 100191, PR China;2. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, PR China;3. Department of Economics, University of International Business and Economics, Beijing 100029, PR China;4. Department of Management Science, Central University of Finance and Economics, Beijing 100081, PR China |
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Abstract: | This paper considers one-way flow network formation games in which transmission through a series of agents is subject to decay. We analyze the myopic best-response dynamics of network formation games, occasionally perturbed by state-dependent random noises. Specifically, if an agent is isolated or has a direct neighbor who is better paid, it is more likely that the agent will make mistakes. Our main result identifies that only empty and wheel networks are candidates for long-term outcomes. |
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