An extension of the Jackson-Wolinsky connections model that adds geographic constraints. Players occupy positions in physical space. Connections are more valuable if players are close, and connecting distant players incurs greater effective "network costs."

where

• Benefits: Based on shortest-path network distance plus a geographic penalty
• Geographic penalty: Treats physical distance as "extra network hops"—distant nodes feel farther in the network
• Pairwise stability: Same as canonical model (add if both benefit, delete if either benefits)
• Cost sharing: Each link costs and costs are split equally between endpoints

Without geographic constraints, networks tend to be highly connected. The spatial model shows how distance naturally leads to clustered, hierarchical networks with local clusters and sparse long-distance "bridges"—patterns observed in real social and economic networks.