Agent Rationality Behind Network Formation

We search for agent behavior rules which lead to the emergence of social networks that exhibit empirically observed phenomena: small-world property, scale-free degree distribution and stability in time. We assume that agents form and sever links using a cost-benefit analysis. Agents receive benefit from own links and from links that their friends form. On the other hand, link formation, deletion and keeping is costly. We find that a simple model structure which relies only on convex cost of link upkeep leads to stable networks which exhibit the small-world property.