## Abstract

We study a basic network creation game proposed by Fabrikant et al. [2003]. In this game, each player (vertex) can create links (edges) to other players at a cost of α per edge. The goal of every player is to minimize the sum consisting of (a) the cost of the links he has created and (b) the sum of the distances to all other players. Fabrikant et al. conjectured that there exists a constant A such that, for any α > A, all nontransient Nash equilibria graphs are trees. They showed that if a Nash equilibrium is a tree, the price of anarchy is constant. In this article, we disprove the tree conjecture. More precisely, we show that for any positive integer n_{0}, there exists a graph built by n ≥ n_{0} players which contains cycles and forms a nontransient Nash equilibrium, for any á with 1 < α ≤ √n/2. Our construction makes use of some interesting results on finite affine planes. On the other hand, we show that, for α ≥ 12n⌈log n⌉, every Nash equilibrium forms a tree. Without relying on the tree conjecture, Fabrikant et al. proved an upper bound on the price of anarchy of O(√α), where α ∈ [2, n^{2}]. We improve this bound. Specifically, we derive a constant upper bound for α ∈ O(√n) and for α ≥ 12n⌈log n⌉. For the intermediate values, we derive an improved bound of O(1 + (min{α^{2}/n, n^{2}α})^{1/3}). Additionally, we develop characterizations of Nash equilibria and extend our results to a weighted network creation game as well as to scenarios with cost sharing.

Original language | English |
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Article number | 2 |

Journal | ACM Transactions on Economics and Computation |

Volume | 2 |

Issue number | 1 |

DOIs | |

State | Published - Mar 2014 |

Externally published | Yes |

## Keywords

- Economics
- F [theory of computation]
- Nash equilibrium
- Network design
- Networks
- Price of anarchy
- Theory