Dynamic Models of Competition with Endogenous Network Formation

The paper examines dynamic network models of competition with endogenous network formation. While competing, member firms can communicate with each other through bilateral links, which in turn allow each firm to increase its profit. Link formation involves mutual agreement, but requires additional costs. The competitive performance of firms is driven by the dynamics of their technological state. Open-loop Nash equilibria are found that determine the multicomponent behavior of firms: production, investment, and network behavior.