Efficient networks in games with local complementarities

Abstract

We address the problem of a planner looking for the efficient network when agents play a network game with local complementarities and links are costly. We show that for general network cost functions, efficient networks belong to the class of nested split graphs. Next, we refine our results and find that, depending on the specification of the network cost function, complete networks, core-periphery networks, dominant group architectures, quasi-star networks, and quasi-complete networks can be efficient.