Game Theoretic Formation of a Centrality Based Network

TL;DR

This paper models network formation as a game where players strategically form connections to maximize centrality, leading to stable networks with hub nodes that improve overall welfare.

Contribution

It introduces a game-theoretic model for network formation based on centrality, deriving stability conditions and demonstrating the emergence of beneficial hub structures.

Findings

Networks reach pairwise stability under the model.

Stable star topologies can be induced to form hub nodes.

Hub nodes positively impact total network welfare.

Abstract

We model the formation of networks as a game where players aspire to maximize their own centrality by increasing the number of other players to which they are path-wise connected, while simultaneously incurring a cost for each added adjacent edge. We simulate the interactions between players using an algorithm that factors in rational strategic behavior based on a common objective function. The resulting networks exhibit pairwise stability, from which we derive necessary stable conditions for specific graph topologies. We then expand the model to simulate non-trivial games with large numbers of players. We show that using conditions necessary for the stability of star topologies we can induce the formation of hub players that positively impact the total welfare of the network.