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Unilateral vs. bilateral link-formation: A transition without decay

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  • Olaizola, Norma
  • Valenciano, Federico

Abstract

We provide a model that bridges the gap between the simplest variation of two benchmark models of strategic network formation: Bala and Goyal’s two-way flow model without decay, where links can be unilaterally formed, and a variation of Jackson and Wolinsky’s model based on bilateral formation of links assuming no decay. In the model introduced and studied here a link can be created unilaterally. When it is only supported by one of the two players the flow through the link suffers some degree of decay, but when it is supported by both the flow runs without friction. When the decay in links supported by only one player is maximal (i.e. there is no flow) we have a simple variation of Jackson and Wolinsky’s connections model assuming no decay, while when flow in those links is perfect we have Bala and Goyal’s two-way flow model without decay. We study Nash, strict Nash and pairwise Nash stability for the intermediate models. Efficiency and dynamics are also examined.

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  • Olaizola, Norma & Valenciano, Federico, 2015. "Unilateral vs. bilateral link-formation: A transition without decay," Mathematical Social Sciences, Elsevier, vol. 74(C), pages 13-28.
    • Handle: RePEc:eee:matsoc:v:74:y:2015:i:c:p:13-28
    DOI: 10.1016/j.mathsocsci.2014.12.002
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      • Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2012. "Asymmetric flow networks," IKERLANAK http://www-fae1-eao1-ehu-, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
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    1. Norma Olaizola & Federico Valenciano, 2018. "A unifying model of strategic network formation," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(4), pages 1033-1063, November.
    2. Norma Olaizola & Federico Valenciano, 2016. "From bilateral two-way to unilateral one-way flow link-formation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(2), pages 257-278, June.
    3. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "Efficiency vs. Stability in a Mixed Network Formation Model," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    4. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "The impact of liberalizing cost-saharing on basic models of network formation," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.

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