Jurjen J.A. Kamphorst

Network Formation with Heterogeneous Players

This paper studies network formation in settings where players are heterogeneous with respect to benefits as well as the costs of forming links. Our results demonstrate that centrality, center-sponsorship and short network diameter are robust features of equilibrium networks. We find that in a society with many groups, where it is cheaper to connect within groups as compared to across groups, strategic play by individuals leads to a network architecture in which there is a core group which is entirely internally connected while all the other groups are entirely externally linked and hence completely fragmented. Since internal/within group links are cheaper to form, this implies that individual incentives may generate a significant waste of valuable social resources.

The Role of Performance Appraisals in Motivating Employees

In many organizations, reward decisions depend on subjective performance evaluations. However, evaluating an employees performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the managers ability to assess him. The manager gives an employee a performance appraisal with a view of affecting the employees self perception, and the employees perception of the managers ability to assess performance. We examine how performance appraisals affect the employees future performance. The predictions of our model are consistent with various empirical findings. These comprise (i) the observation that managers tend to give positive appraisals, (ii) the finding that on average positive appraisals motivate more than negative appraisals, and (iii) the observation that the effects of appraisals depend on the employees perception of the managers ability to assess performance accurately.

Two-way Flow Networks with Small Decay

The set of equilibrium networks in the two-way flow model of network formation (Bala and Goyal, 2000) is very sensitive to the introduction of decay. Even if decay is small enough so that equilibrium networks are minimal, the set of equilibrium architectures becomes much richer, especially when the benefit functions are nonlinear. However, not much is known about these architectures. In this paper we remedy this gap in the literature. We characterize the equilibrium architectures. Moreover, we show results on the relative stability of different types of architectures. Three of the results are that (i) at most one players receives multiple links, (ii) the absolute diameter of equilibrium networks can be arbitrarily large, and (iii) large (small) diameter networks are relatively stable under concave (convex) benefit functions.

Rational Signals of Weakness in a Market Entry Game

It is well established that incumbent firms may try to deter market entry by pretending to be stronger than they really are. In this article, we show that in some cases an incumbent may prefer the opposite, namely to encourage entry by signaling weakness. If the incumbent cannot deter entry of a potential strong entrant by itself, it may elicit entry of a weaker firm that would not enter if it were informed about the incumbent´s true strength. The presence of the additional firm can prevent further entry. Consequently, the incumbent faces a weaker competitor in the long run.

Network formation when players seek confirmation of information

We study network formation in a situation where the network allows players to obtain information (signals) about other players. This information is important for making a payoff relevant decision. However, not all information is reliable and so players may have an incentive to check it. By obtaining multiple messages about the same player through the network, a player learns whether his information is reliable for making the payoff relevant decision. We study the existence and architecture of strict Nash networks. We find that players who are involved in at least three links sponsor all links they are involved in. These players are similar to the central players in center sponsored stars. We show that strict Nash networks can be over-connected as well as under-connected as compared to efficient networks. Finally, we extend the basic model to study heterogeneous populations. In the first scenario, we allow for the co-existence of players who only value checked information and players who also value information with unknown reliability. In the second scenario, players who do not care about checking their information co-exist with players who do. Our results are robust to both types of heterogeneity, with one exception: the presence of a single player who cares only about checked information is enough to ensure that center sponsored stars are no longer stable.

Learning in a Local Interaction Hawk-Dove Game

We study how players in a local interaction hawk dove game will learn, if they can either imitate the most successful player in the neighborhood or play a best reply versus the opponents previous action. From simulations it appears that each learning strategy will be used, because each performs better when it is less popular. Despite that, clustering may occur if players choose their learning strategy on the basis of largely similar information. Finally, on average players will play Hawk with a probability larger than in the mixed Nash equilibrium of the stage game.