Network Formation: Bilateral Contracting and Myopic Dynamics

Network Formation for Asymmetric Players and Bilateral Contracting

“…Each player can contract bilaterally with others to form bidirectional links or break unilaterally contracts to eliminate the corresponding links. Our model is an extension of the traffic routing model considered in [5,6,7] in which we do not require the traffic to be uniform and all-to-all. Player i specifies the amount of traffic tij ≥ 0 that wants to send to player j.…”

“…In the models studied by Arcaute el al. in [5,6,7] each node derives utility from connectivity and incurs a cost. The cost is comprised of three different terms: the cost of routing traffic, the maintenance cost of its links, and the disconnection cost.…”

“…The player's utility comes from the payments for the contracts which are a natural mechanism to compensate the costs of creating links. In this model link formation is bilateral, while link elimination is unilateral, and then an appropriate notion of stability is captured by Pairwise Nash equilibrium, as it is argued in [5,7]. The authors study such game under a form of myopic best response dynamics and they characterize a set of assumptions under which these dynamics converges to a stable network.…”

“…The authors study such game under a form of myopic best response dynamics and they characterize a set of assumptions under which these dynamics converges to a stable network. The authors left as an open question the extension of the model defined in [5,7] to asymmetric traffic matrix instead of the uniform all-to-all traffic considered in the paper. They also suggest to expand the strategy space considered by each node in their dynamics.…”

“…In this work we extend the model of Arcaute et al [5,7] by considering asymmetric players. Each player i specifies the amount of traffic t ij that desires to send to player j for each j = i.…”