Towards Efficient Equilibria of Combinations of Network-Formation and Interaction Strategies

Abstract

Agents in networks have two strategic choices: They can forward/process incoming service requests – or not, and they can establish additional contacts and maintain or terminate existing ones. In other words, an agent can choose both an action-selection and a link-selection strategy. So far, it is unclear which equilibria exist in such settings. We show that there are the following equilibria: First, an inefficient one where agents leave the network. Second, an equilibrium where agents process requests on behalf of others, i.e., they cooperate. In this second equilibrium, agents distribute their contacts uniformly, which is not efficient. We show that a strategy, we propose in this paper, yields an equilibrium that is optimal, i.e., that yields the highest sum of payoffs over all equilibria. If agents base their link-selection decisions on the processing times of their requests, optimal system states can be equilibria.