In this project, the PI formulates game theoretic models to study the formation and stability of networks, with applications to merger policy and the internet. The research is inspired by possible applications of the theory that is being build, rather than taking the theory itself as a point of departure. Insights gained from the study of network structures in economic and social situations, are used to identify specific types of networks and specific circumstances in which networks play an important role. Additional structure imposed by incorporating the institutional details of these situations are likely to produce tractable models and policy-relevant results. The existing models of (the formation of) cooperation structures are extended to encompass costs on links in networks and to study situations in which there are externalities between groups of agents. With the rapid evolution of the internet recent years and globalization of the economy, it is apparent that networks have a major influence on our daily lives. Recent research tackles the problem of modeling cooperation structures from several different perspectives. However, interesting problems remain that cannot be answered using the models and the techniques that are currently known. These problems include mergers by Cournot firms and the extension of the internet and the problems associated with this extension.
