Y.: Nestedness in networks: a theoretical model and some applications. CEPR Discussion Paper no

We develop a dynamic network formation model that can explain the observed nestedness in real-world networks. Links are formed on the basis of agents ’ cen-trality and have an exponentially distributed lifetime. We use stochastic stability to identify the networks to which the network formation process converges and find that they are nested split graphs. We completely determine the topological properties of the stochastically stable networks and show that they match fea-tures exhibited by real-world networks. Using four different network data sets, we empirically test our model and show that it fits well the observed networks