Strategic Network Formation with Structural Holes

Presented by Siddharth Suri, Yahoo! Research Scientist. A fundamental principle in social network research is that individuals can benefit from serving as intermediaries between others who are not directly connected. Through such intermediation, they potentially can broker the flow of information and synthesize ideas arising in different parts of the network. These principles form the... » More

Presented by Siddharth Suri, Yahoo! Research Scientist. A fundamental principle in social network research is that individuals can benefit from serving as intermediaries between others who are not directly connected. Through such intermediation, they potentially can broker the flow of information and synthesize ideas arising in different parts of the network. These principles form the underpinning for the theory of structural holes, which studies the ways in which individuals, particularly in organizational settings, fill the "holes" between people or groups that are not otherwise interacting.

We apply a game-theoretic approach to this notion, studying the structures that evolve when individuals in a social network have incentives to form links that bridge otherwise disconnected parties. We model payoffs as a trade-off between the benefits of connecting non-neighboring nodes, and the cost, in effort, to maintain links - including settings where the costs are non-uniform to reflect the increased difficulty in spanning different parts of a hierarchical organization.

We find, both through theoretical results and computational experiments, that the equilibrium networks in this model have rich combinatorial structure, and capture qualitative observations arising in the study of structural holes. In particular, even in completely symmetric settings, individuals will differentiate themselves in equilibrium, occupying different social strata and receiving correspondingly different payoffs. « Hide