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On the Interaction between Heterogeneity and Decay in Two-way Flow Models

Author

Listed:
  • Pascal Billand

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

  • Christophe Bravard

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

  • Sudipta Sarangi

    (Department of Economics, Louisiana State University - LSU - Louisiana State University [BatonRouge])

Abstract

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.

Suggested Citation

  • Pascal Billand & Christophe Bravard & Sudipta Sarangi, 2012. "On the Interaction between Heterogeneity and Decay in Two-way Flow Models," Post-Print halshs-00764646, HAL.
    • Handle: RePEc:hal:journl:halshs-00764646
    DOI: 10.1007/s11238-011-9279-y
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    Cited by:

    1. Christophe Bravard & Sudipta Sarangi & PHILIPP MÖHLMEIER & AGNIESZKA RUSINOWSKA & EMILY TANIMURA, 2016. "A Degree-Distance-Based Connections Model with Negative and Positive Externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(2), pages 168-192, April.
    2. Olaizola, By Norma & Valenciano, Federico, 2021. "Efficiency and stability in the connections model with heterogeneous nodes," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 490-503.
    3. Hitomu Kotani & Muneta Yokomatsu, 2019. "Quantitative evaluation of the roles of community events and artifacts for social network formation: a multilayer network model of a community of practice," Computational and Mathematical Organization Theory, Springer, vol. 25(4), pages 428-463, December.

    More about this item

    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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