Network Design in Games with Spillovers

24 Pages Posted: 28 Nov 2006

See all articles by Sergio Currarini

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Date Written: March 2006


How should an organization be designed in order to provide its members with minimal incentives to defect? And how does the optimal design depend on the type of strategic interaction between defectors and remaining organizational members? This paper addresses such issues in a game theoretic model of cooperation, in which an organization is formally represented by a connected network, and where gains from cooperation are given by a partition function. We show that critical structural features of the organization depend in a clear-cut way on the sign of spillovers. In particular, positive spillovers favor the adoption of dispersed and centralized forms, while negative spillovers favor cohesive and horizontal ones. Moreover, if the organizational form determines all the communication possibilities of members, a highly centralized organization - the star - emerges under positive spillovers, whereas two horizontal architectures - the circle and the complete - emerge under negative spillovers.

Keywords: Organizational design, networks, group stability, spillovers

JEL Classification: C7, C71, D20

Suggested Citation

Currarini, Sergio, Network Design in Games with Spillovers (March 2006). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 16/06, Available at SSRN: or

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121

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