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Efficient networks in connections models with heterogeneous nodes and links

Author

Listed:
  • Olaizola, Norma
  • Valenciano, Federico

Abstract

We culminate the extension of the results on efficiency in the seminal connections model of Jackson and Wolinsky (1996), partially addressed in previous papers. In a model where both nodes and links are heterogeneous, we prove that efficiency is reached by networks with a particular type of architecture that we call "hierarchical flower networks". These networks have a unique non-trivial component, within which one of the nodes with a highest value is directly connected with the others in the component, among which some pairs are directly connected. Moreover, the greatest the sum of the values of two nodes, the greatest the strength of their connection, be it direct by a link or indirect by means of two links through the central node.

Suggested Citation

  • Olaizola, Norma & Valenciano, Federico, 2022. "Efficient networks in connections models with heterogeneous nodes and links," MPRA Paper 114884, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:114884
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    References listed on IDEAS

    as
    1. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    2. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    3. Norma Olaizola & Federico Valenciano, 2020. "Dominance of weighted nested split graph networks in connections models," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(1), pages 75-96, March.
    4. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    5. 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.
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    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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