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Regular version of the site

Article

Equilibrium in a Network Game with Production and Knowledge Externalities

Automation and Remote Control. 2019. Vol. 79. No. 7. P. 1342-1360.
Matveenko V. D., Korolev A. V.

In each node of a network, economy is described by the simple two-period Romer’s
model of endogenous growth with production and knowledge externalities. The sum of knowledge
levels in the neighbor nodes causes an externality in the production of each node of the
network. The game equilibrium in the network is investigated. The agents’ solutions depending
on the size of externality are obtained. The uniqueness of inner equilibrium is proved. The role
of passive agents in network formation is studied; in particular, the possibilities of adding a
passive agent to a regular network, and also of joining of regular networks through nodes with
passive agents. It is shown that the sum of knowledge levels in all the nodes decreases under
adding of a new link.