A Theory of Network Games Part 1: Utility Representations

Abstract

We provide interpretable axiomatic foundations for utilities used in network games and identify several principled generalizations. First, we demonstrate that a ubiquitous feature of network games, bilateral strategic interactions, is equivalent to having player utilities that are additively separable across opponents. Common utilities based on a linear aggregate of opponent actions are strategically equivalent to additively separable utilities. Moreover, assuming real-valued actions, we show that a constant rate of substitution between opponents implies a utility that is linear in opponent actions. Finally, we identify precise conditions--linear best replies and midpoint indifference--that pin down the classic linear-quadratic utility.