Ballester, Coralio and Antoni Calvó-Armengol
Regional Science and Urban Economics – 40 (2011): 397-407
Keywords: Interactions,complementarities,substitutabilities,linear-quadratic,networks,Nash equilibrium,linear complementarity problem,bonacich,katz,centrality
Abstract: We consider a finite population simultaneous move game with heterogeneous interaction modes across different pairs of players. We allow for general interaction patterns, but restrict our analysis to games whose pure strategy Nash equilibrium conditions boil down to a set of piece-wise linear conditions, so that an equilibrium is a solution to a linear complementarity problem. We introduce a new class of games for which a suitable linear transformation of the original interaction matrix induces a game with complementarities. We provide general moderation conditions on the interaction matrix such that a game in this class has a unique Nash equilibrium, that we are able to characterize by means of a closed-form expression involving a generalized version of the Katz network measure of node centrality.