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One-way flow networks: the role of heterogeneity

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  • Andrea Galeotti

Abstract

I study a one-way flow connections model in which players are heterogeneous with respect to values and the costs of establishing a link. I first show that values and costs asymmetries are crucial in determining the level of connectedness of a network. Interestingly, unconnected equilibria are asymmetric and central players may emerge. Second, I show that non-singleton components have a wheel architecture as far as the costs of linking are not partner specific. Otherwise also the flower architecture constitutes an equilibrium. I interpret these results as saying that asymmetric connections across players are a peculiar feature of homogeneous environments; by contrast, in heterogeneous settings players hold asymmetric connections, which are accompanied by the emergence of central players.
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  • Andrea Galeotti, 2006. "One-way flow networks: the role of heterogeneity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 163-179, September.
    • Handle: RePEc:spr:joecth:v:29:y:2006:i:1:p:163-179
    DOI: 10.1007/s00199-005-0015-0
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    More about this item

    Keywords

    Network formation; Heterogeneity; D85; C72;
    All these keywords.

    JEL classification:

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

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