Asymmetric flow networks

Norma Olaizola () and Federico Valenciano

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

Abstract: This paper provides a new model of network formation that bridges the gap between the two benchmark models by Bala and Goyal, the one-way flow model, and the two-way flow model, and includes both as particular extreme cases. As in both benchmark models, in what we call an "asymmetric flow" network a link can be initiated unilaterally by any player with any other, and the flow through a link towards the player who supports it is perfect. Unlike those models, in the opposite direction there is friction or decay. When this decay is complete there is no flow and this corresponds to the one-way flow model. The limit case when the decay in the opposite direction (and asymmetry) disappears, corresponds to the two-way flow model. We characterize stable and strictly stable architectures for the whole range of parameters of this "intermediate" and more general model. We also prove the convergence of Bala and Goyal's dynamic model in this context.

Keywords: non-cooperative network formation; asymmetric flow; stability; efficiency; dynamics (search for similar items in EconPapers)
Date: 2012-06-22
New Economics Papers: this item is included in nep-gth, nep-mic and nep-net
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Journal Article: Asymmetric flow networks (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ehu:ikerla:8633

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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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