Modeling interactions in a dynamic heuristic business network

Abstract

This article presents a novel model for understanding the structure and dynamics of business networks, emphasizing the role of propensities to connect and cooperate as key drivers. The model incorporates behavioral elements and imperfect information updates, departing from traditional rational actor approaches. Starting from the theoretical background, several propositions are outlined, such as dynamism, connection choices, costs, strategy selection, information update, and the update based on experiences. Through simulations, the study successfully demonstrates that the proposed model effectively captures essential characteristics of business networks, including reciprocity, complexity, adaptation, and cooperation. The findings highlight the significance of propensities to connect and cooperate in shaping network structure, evolution, and stability. Particularly, higher propensities to cooperate and connect lead to denser and more cohesive networks, fostering reciprocity, stability, and network performance. The increase only in connection propensities does not have the same result. The lower cooperation propensities result in scale-free networks and asymmetrical distribution of cumulative payoffs. This highlights a crucial insight: different levels of cooperation lead to distinct network properties. Practical implications, increasingly relevant with the rise of digital platforms and metaverse, suggest targeted interventions to enhance network effectiveness, such as incentivizing cooperation, reducing relationship costs, and promoting a culture of trust and collaboration. While providing valuable insights, certain limitations exist, such as not considering the influence of preexisting economic or social structures, equalizing costs and payoffs among actors, and overlooking specific reasons for network connections. Future research should address these refinements and explore their effects on network structure and process characteristics.