IDEAS home Printed from https://ideas.repec.org/p/ehu/ikerla/14746.html
   My bibliography  Save this paper

A Unifying model of strategic network formation

Author

Listed:
  • Olaizola Ortega, María Norma
  • Valenciano Llovera, Federico

Abstract

We provide a model that merges two basic models of strategic network formation and incorporates them as extreme cases: Jackson and Wolinsky' s connections model based on bilateral formation of links, and Bala and Goyal' s two-way flow model, where links can be unilaterally formed. In our model a link can be created unilaterally, but when it is only supported by one of the two players the flow through it suffers some friction or decay, but more than when it is supported by both players. When the friction in singly-supported links is maximal (i.e. there is no fl ow) we have Jackson and Wolinsky 's connections model, while when fl ow in singly-supported links is as good as in doubly-supported links we have Bala and Goyal' s two-way flow model. In this setting, a joint generalization of the results relative to efficiency and stability in both seminal papers is achieved, and the robustness in both models is tested with positive results.

Suggested Citation

  • Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "A Unifying model of strategic network formation," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    • Handle: RePEc:ehu:ikerla:14746
    as

    Download full text from publisher

    File URL: https://addi.ehu.es/handle/10810/14746
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Olaizola, Norma & Valenciano, Federico, 2015. "Unilateral vs. bilateral link-formation: A transition without decay," Mathematical Social Sciences, Elsevier, vol. 74(C), pages 13-28.
    2. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521857406, September.
    3. Haller, Hans & Sarangi, Sudipta, 2005. "Nash networks with heterogeneous links," Mathematical Social Sciences, Elsevier, vol. 50(2), pages 181-201, September.
    4. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks," Introductory Chapters, in: Connections: An Introduction to the Economics of Networks, Princeton University Press.
    5. 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.
    6. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
    7. Roger B. Myerson, 1977. "Graphs and Cooperation in Games," Mathematics of Operations Research, INFORMS, vol. 2(3), pages 225-229, August.
    8. Venkatesh Bala & Sanjeev Goyal, 2000. "original papers : A strategic analysis of network reliability," Review of Economic Design, Springer;Society for Economic Design, vol. 5(3), pages 205-228.
    9. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    10. Olaizola, Norma & Valenciano, Federico, 2014. "Asymmetric flow networks," European Journal of Operational Research, Elsevier, vol. 237(2), pages 566-579.
      • Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2012. "Asymmetric flow networks," IKERLANAK http://www-fae1-eao1-ehu-, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    11. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521674096, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2017. "Efficiency of weighted networks," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. Norma Olaizola & Federico Valenciano, 2020. "Characterization of efficient networks in a generalized connections model with endogenous link strength," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(3), pages 341-367, 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. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "Efficiency vs. Stability in a Mixed Network Formation Model," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    5. Ding, Sihua, 2022. "Link investment substitutability: A factor influencing network formation," Games and Economic Behavior, Elsevier, vol. 136(C), pages 340-359.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olaizola, Norma & Valenciano, Federico, 2015. "Unilateral vs. bilateral link-formation: A transition without decay," Mathematical Social Sciences, Elsevier, vol. 74(C), pages 13-28.
    2. Norma Olaizola & Federico Valenciano, 2016. "From bilateral two-way to unilateral one-way flow link-formation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(2), pages 257-278, June.
    3. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2016. "A Marginalist Model of Network Formation," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    4. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2014. "Unilateral vs. Bilateral link-formation: Bridging the gap," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    5. Olaizola, Norma & Valenciano, Federico, 2013. "Network formation under linking constraints," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(20), pages 5194-5205.
    6. Jackson, Matthew O. & Zenou, Yves, 2015. "Games on Networks," Handbook of Game Theory with Economic Applications,, Elsevier.
    7. Olaizola, Norma & Valenciano, Federico, 2014. "Asymmetric flow networks," European Journal of Operational Research, Elsevier, vol. 237(2), pages 566-579.
      • Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2012. "Asymmetric flow networks," IKERLANAK http://www-fae1-eao1-ehu-, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    8. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2011. "Network formation under institutional constraints," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    9. Olaizola, Norma & Valenciano, Federico, 2020. "A connections model with decreasing returns link-formation technology," MPRA Paper 107585, University Library of Munich, Germany.
    10. Olaizola, Norma & Valenciano, Federico, 2010. "Information, Stability and Dynamics in Networks under Institutional Constraints," Sustainable Development Papers 96844, Fondazione Eni Enrico Mattei (FEEM).
    11. Bravard, Christophe & Charroin, Liza & Touati, Corinne, 2017. "Optimal design and defense of networks under link attacks," Journal of Mathematical Economics, Elsevier, vol. 68(C), pages 62-79.
    12. Sanjeev Goyal & Adrien Vigier, 2014. "Attack, Defence, and Contagion in Networks," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1518-1542.
    13. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "Efficiency vs. Stability in a Mixed Network Formation Model," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    14. PAPACCIO, Anna, 2013. "Bilateralism and Multilateralism: a Network Approach," CELPE Discussion Papers 125, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    15. 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.
    16. Norma Olaizola & Federico Valenciano, 2020. "Characterization of efficient networks in a generalized connections model with endogenous link strength," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(3), pages 341-367, September.
    17. De Jaegher, K. & Kamphorst, J.J.A., 2015. "Minimal two-way flow networks with small decay," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 217-239.
    18. Kets, W., 2008. "Networks and learning in game theory," Other publications TiSEM 7713fce1-3131-498c-8c6f-3, Tilburg University, School of Economics and Management.
    19. Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "The impact of liberalizing cost-saharing on basic models of network formation," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    20. Konno, Tomohiko, 2013. "An imperfect competition on scale-free networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(21), pages 5453-5460.

    More about this item

    Keywords

    network formation; unilateral link-formation; bilateral link-formation; efficiency; stability;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehu:ikerla:14746. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alcira Macías Redondo (email available below). General contact details of provider: https://edirc.repec.org/data/f1ehues.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.