Centralized or Decentralized? A Principal Agent Game of Network Formation

We construct a model of a principal-agent game of network formation (over layered networks) with asymmetric information, which is called delegated networking and we show, under relatively mild conditions on our game-theoretic model of network formation, that strategic network formation with incomplete information, implemented via a mechanism and centralized reporting, is equivalent to implementation via delegated networking with monitoring. One potential application lies in the computation of optimal resolution of the incentive compatibility problem associated with decentralized data storage via blockchain networks.