On formation of cooperative networks in presence of network effects
Situations that require individuals to mutually cooperate have been widely analysed as cooperation games. This paper proposes a model for the formation of cooperative networks through multiple agents interacting with each other under base incentives of a coordination game. Network effects are modelled in by assuming that the value of every mutually cooperative link is enhanced by agents' own trustworthiness as perceived by their partners. Trustworthiness depends on the number of cooperative links that an agent extends and can be observed by other agents through the network itself.