From bilateral two-way to unilateral one-way flow link-formation

Norma Olaizola () and Federico Valenciano

IKERLANAK from Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I

Abstract: We provide a model that bridges de gap between the simplest variation of two benchmark models of strategic network formation: Bala and Goyal s one-way ow model without decay, where links can be unilaterally formed, and a variation without decay of Jackson and Wolinsky s connections model based on bilateral formation of links. In the model introduced here, a link can be created unilaterally, but when it is only supported by one player the ow through the link only occurs towards the player supporting it and su¤ers some degree of decay, while when it is supported by both the ow runs without friction in both directions. When the decay in links supported by only one player is maximal (i.e. there is no ow) we have Jackson and Wolinsky s connections model without decay, while when ow in those links is perfect towards the player supporting them, we have Bala and Goyal s one-way ow model. We study Nash, strict Nash and pairwise Nash stability for the intermediate models. E¢ ciency and dynamics are also discussed.

Keywords: network formation; unilateral link-formation; bilateral link-formation; stability; efficiency; dynamics (search for similar items in EconPapers)
Date: 2014-11-26
New Economics Papers: this item is included in nep-cdm and nep-gth
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Journal Article: From bilateral two-way to unilateral one-way flow link-formation (2016)
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Dpto. de Fundamentos del Análisis Económico I, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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