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Asymmetric flow networks

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  • Olaizola Ortega, María Norma
  • Valenciano Llovera, Federico

Abstract

This paper provides a new model of network formation that bridges the gap between the two benchmark models by Bala and Goyal, the one-way flow model, and the two-way flow model, and includes both as particular extreme cases. As in both benchmark models, in what we call an "asymmetric flow" network a link can be initiated unilaterally by any player with any other, and the flow through a link towards the player who supports it is perfect. Unlike those models, in the opposite direction there is friction or decay. When this decay is complete there is no flow and this corresponds to the one-way flow model. The limit case when the decay in the opposite direction (and asymmetry) disappears, corresponds to the two-way flow model. We characterize stable and strictly stable architectures for the whole range of parameters of this "intermediate" and more general model. We also prove the convergence of Bala and Goyal's dynamic model in this context.

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Bibliographic Info

Paper provided by Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I in its series IKERLANAK with number Ikerlanak;2012-60.

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Date of creation: 22 Jun 2012
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Handle: RePEc:ehu:ikerla:8633

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Postal: Dpto. de Fundamentos del Análisis Económico I, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Related research

Keywords: non-cooperative network formation; asymmetric flow; stability; efficiency; dynamics;

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References

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  1. Francis Bloch & Bhaskar Dutta, 2008. "Communication networks with endogeneous link strength," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-15, Indian Statistical Institute, New Delhi, India.
  2. Jean Derks & Martijn Tennekes, 2009. "A note on the existence of Nash networks in one-way flow models," Economic Theory, Springer, vol. 41(3), pages 515-522, December.
  3. Andrea Galeotti, 2004. "One-way Flow Networks: the Role of Heterogeneity," Tinbergen Institute Discussion Papers 04-031/1, Tinbergen Institute.
  4. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks
    [Connections: An Introduction to the Economics of Networks]
    ," Introductory Chapters, Princeton University Press.
  5. Andrea Galeotti & Sanjeev Goyal & Jurjen Kamphorst, 2003. "Network Formation with Heterogeneous Players," Economics Discussion Papers 562, University of Essex, Department of Economics.
  6. McBride, Michael, 2006. "Imperfect monitoring in communication networks," Journal of Economic Theory, Elsevier, vol. 126(1), pages 97-119, January.
  7. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
  8. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  10. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  11. Feri, Francesco, 2007. "Stochastic stability in networks with decay," Journal of Economic Theory, Elsevier, vol. 135(1), pages 442-457, July.
  12. Sanjeev Goyal & Fernando Vega-Redondo, 2003. "Network Formation and Social Coordination," Working Papers 481, Queen Mary, University of London, School of Economics and Finance.
  13. Sudipta Sarangi & Pascal Billand & Christophe Bravard, . "Existence of Nash Networks in One-Way Flow Models," Departmental Working Papers 2006-05, Department of Economics, Louisiana State University.
  14. Venkatesh Bala & Sanjeev Goyal, 2000. "original papers : A strategic analysis of network reliability," Review of Economic Design, Springer, vol. 5(3), pages 205-228.
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