Strategic Interaction in k-neighborhood on the Network Formation

In the context of endogenous network formation, we study strategic interaction among players within k-neighborhood. Based on the myopic best response rule, players choose action and establish links with other players by unilaterally investing in costly pair wise links in the evolution of networks. First, we characterize the equilibrium networks and describe the impact of the link cost on the equilibrium networks. Next, we find that the dynamics of network formation plays an important role in the choice of players´ action. At last, we illustrate and complement the analytical results by Net Logo simulation. The result of this paper is useful to solve the interaction problems in social networks and economics.