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Unformatted text preview: models of trade economies as discussed recently in class. a. For the networks below, write the equilibrium wealths or prices in the space beside each vertex, assuming all vertices are initially endowed with one unit of milk or wheat and have preferences only for the other good. Wealth: Milks Wheats Wealth: Wealth: Milks Wheats Wealth: b. Draw a network with 4 Milk and 4 Wheat players in which all the equilibrium wealth values of the Milks are 0.5, 0.5, 1 and 2. 4. (20 points) Consider a network formation game in which each of N players may purchase edges from their own vertex to other players for a fixed cost of c per edge. Let G denote the network formed by the collective edge purchases of all players. The overall payoff to a given player X is then equal to the number of players X is connected to in G, minus the total edge expenditures of player X. By “connected to”, we mean reachable by any finite‐length path. Note that we view this as a one‐shot game, in which all players simultaneously decide whi...
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 Spring '14

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