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One-way Flow Networks: the Role of Heterogeneity

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  • Andrea Galeotti

    ()
    (Faculty of Economics, Erasmus Universiteit Rotterdam)

Abstract

I study a one-way flow connections model in which players are heterogeneous with respect to values and the costs of establishing a link. I first show that values and costs asymmetries are crucial in determining the level of connectedness of a network. Interestingly, unconnected equilibria are asymmetric and central players may emerge. Second, I show that non-singleton components have a wheel architecture as far as the costs of linking are not partner specific. Otherwise also the flower architecture constitutes an equilibrium. I interpret these results as saying that asymmetric connections across players are a peculiar feature of homogeneous environments; by contrast, in heterogeneous settings players hold asymmetric connections, which are accompanied by the emergence of central players.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-031/1.

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Date of creation: 15 Mar 2004
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Handle: RePEc:dgr:uvatin:20040031

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Web page: http://www.tinbergen.nl

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Keywords: Networks; heterogeneity;

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  1. Falk, Armin & Kosfeld, Michael, 2003. "It's all about Connections: Evidence on Network Formation," IZA Discussion Papers 777, Institute for the Study of Labor (IZA).
  2. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  3. Basu, Kaushik & Weibull, Jorgen W., 1991. "Strategy subsets closed under rational behavior," Economics Letters, Elsevier, vol. 36(2), pages 141-146, June.
  4. McBride, Michael, 2006. "Imperfect monitoring in communication networks," Journal of Economic Theory, Elsevier, vol. 126(1), pages 97-119, January.
  5. Slikker, M. & Nouweland, C.G.A.M. van den, 1997. "A One-Stage Model of Link Formation and Payoff Division," Discussion Paper 1997-23, Tilburg University, Center for Economic Research.
  6. Haller, Hans & Sarangi, Sudipta, 2005. "Nash networks with heterogeneous links," Mathematical Social Sciences, Elsevier, vol. 50(2), pages 181-201, September.
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