The Calculation and Simulation of the Price of Anarchy for Network Formation Games
For researchers studying organizational networks, this work provides a framework to analyze strategic network formation, but the results are incremental and lack concrete performance numbers.
The paper models network formation as a game where selfish players choose links to maximize their own objectives, and presents an Integer Program to calculate the price of anarchy. Simulations show the price of anarchy tends to be low.
We model the formation of networks as the result of a game where by players act selfishly to get the portfolio of links they desire most. The integration of player strategies into the network formation model is appropriate for organizational networks because in these smaller networks, dynamics are not random, but the result of intentional actions carried through by players maximizing their own objectives. This model is a better framework for the analysis of influences upon a network because it integrates the strategies of the players involved. We present an Integer Program that calculates the price of anarchy of this game by finding the worst stable graph and the best coordinated graph for this game. We simulate the formation of the network and calculated the simulated price of anarchy, which we find tends to be rather low.