We study network games in which players choose both the partners with whom they associate and an action level (e.g., effort) that creates spillovers for those partners. We introduce a framework and two solution concepts, extending standard approaches for analyzing each choice in isolation: Nash equilibrium in actions and pairwise stability in links. Our main results show that, under suitable order conditions on incentives, stable networks take simple forms. The first condition concerns whether links create positive or negative payoff spillovers. The second concerns whether actions are strategic complements to links, or strategic substitutes. Together, these conditions yield a taxonomy of the relationship between network structure and economic primitives organized around two network architectures: ordered overlapping cliques and nested split graphs. We apply our model to understand the consequences of competition for status, to microfound matching models that assume clique formation, and to interpret empirical findings that highlight unintended consequences of group design.

翻译：我们研究一类网络博弈，其中参与者同时选择交往伙伴以及会产生溢出效应的行动水平（如努力程度）。我们提出一个框架及两种解概念，将标准方法扩展至对每种选择的孤立分析：行动层面的纳什均衡与链接层面的成对稳定性。主要结果表明，在激励满足适当序条件的情况下，稳定网络呈现简单结构。第一个条件涉及链接是否产生正或负的收益溢出效应，第二个条件则关注行为是链接的战略互补品还是战略替代品。这两个条件共同构建了一个基于两种网络架构（有序重叠派系与嵌套分裂图）的分类体系，用以描述网络结构与经济基础要素之间的关系。我们应用该模型解析地位竞争的社会后果，为假设派系形成的匹配模型提供微观基础，并解释突显群体设计非预期影响的实证发现。