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On the interaction between heterogeneity and decay in two-way flow models

  • Pascal Billand

    ()

  • Christophe Bravard

    ()

  • Sudipta Sarangi

    ()

In this article, we examine the role played by heterogeneity in the popular “connections model” of Jackson and Wolinsky (J Econ Theory 71(1):355–365, 1996 ). We prove that when heterogeneity with respect to the values of resources, or the information decay parameter, depends on the identity of the player who forms the link, and the player who receives the link, all networks can be supported as Nash. Moreover, we show that Nash networks may not always exist. Interestingly, in the absence of decay, neither result occurs in a model with value heterogeneity. Finally, we show that when reducing heterogeneity, all networks cannot be supported as Nash, and the non-existence problem also disappears. Copyright Springer Science+Business Media, LLC. 2012

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File URL: http://hdl.handle.net/10.1007/s11238-011-9279-y
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Article provided by Springer in its journal Theory and Decision.

Volume (Year): 73 (2012)
Issue (Month): 4 (October)
Pages: 525-538

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Handle: RePEc:kap:theord:v:73:y:2012:i:4:p:525-538
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100341

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  1. Sudipta Sarangi & Hans Haller & Jurjen Kamphorst, . "(Non-)Existence and Scope of Nash Networks," Departmental Working Papers 2005-14, Department of Economics, Louisiana State University.
  2. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  4. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
  6. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
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