  We propose a signed network formation game, in which pairs of individuals
strategically change the signs of the edges in a complete network. These
individuals are members of a social network who strategically reduce cognitive
dissonances by changing their interpersonal appraisals. We characterize the
best-response dynamics for this game and prove that its implementation \pc{can}
dynamically drive the network to a sociologically meaningful sign configuration
called clustering balance. In this configuration, agents in the social network
form one or more clusters that have positive relationships among their members
but negative relationships among members of other clusters. In the past,
various researchers in the fields of psycho-sociology, political science, and
physics have looked at models that explain the generation of up to two
clusters. Our work contributes to these fields by proposing a simple model that
generates a broader class of signed networks.
