Efficient networks in connections models with heterogeneous nodes and links

Olaizola, Norma and Valenciano, Federico (2022): Efficient networks in connections models with heterogeneous nodes and links.

Abstract

We culminate the extension of the results on efficiency in the seminal connections model of Jackson and Wolinsky (1996), partially addressed in previous papers. In a model where both nodes and links are heterogeneous, we prove that efficiency is reached by networks with a particular type of architecture that we call "hierarchical flower networks". These networks have a unique non-trivial component, within which one of the nodes with a highest value is directly connected with the others in the component, among which some pairs are directly connected. Moreover, the greatest the sum of the values of two nodes, the greatest the strength of their connection, be it direct by a link or indirect by means of two links through the central node.

• Item Type: MPRA Paper
• Language: English
• Keywords: Networks; Connections model; Heterogeneity; Efficiency
• Subjects: A - General Economics and Teaching > A1 - General Economics > A14 - Sociology of Economics; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory

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Olaizola, N., and F. Valenciano, 2021, Efficiency and stability in the connections model with heterogenous nodes, Journal of Economic Behavior and Organization, 189(5), 490-503.

Olaizola, N., and F. Valenciano, 2022, A connections model with decreasing returns link-formation technology, forthcoming in SERIEs.