A continuous model of strong and weak ties

Alan Griffith

Journal of Public Economic Theory, 2022, vol. 24, issue 6, 1519-1563

Abstract: When individuals interact in a network, links are often asymmetric and of varying intensity. I study a model whereby networks emerge from agents maximizing utility from continuous linking decisions and self‐investment. The joint link surplus function allows arbitrary, bounded heterogeneity in the benefit to forming links. Under decreasing returns to scale in link surplus, the set of Nash equilibria is well‐behaved. In contrast, with constant or increasing returns to scale, heterogeneity and returns to self‐investment limit the set of Nash equilibria. This model rationalizes equilibrium networks in which individuals simultaneously hold ties that are asymmetric and of varying intensity.

Date: 2022
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