The Game-Theoretic Formation of Interconnections Between Networks

Abstract: We introduce a network design game where the objective of the players is to design the interconnections between the nodes of two different networks $G_1$ and $G_2$ in order to maximize certain local utility functions. In this setting, each player is associated with a node in $G_1$ and has functional dependencies on certain nodes in $G_2$. We use a distance-based utility for the players in which the goal of each player is to purchase a set of edges (incident to its associated node) such that the sum of the distances between its associated node and the nodes it depends on in $G_2$ is minimized. We consider a heterogeneous set of players (i.e., players have their own costs and benefits for constructing edges). We show that finding a best response of a player in this game is NP-hard. Despite this, we characterize some properties of the best response actions which are helpful in determining a Nash equilibrium for certain instances of this game. In particular, we prove existence of pure Nash equilibria in this game when $G_2$ contains a star subgraph, and provide an algorithm that outputs such an equilibrium for any set of players. Finally, we show that the price of anarchy in this game can be arbitrarily large.