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Efficient Network Structures with Separable Heterogeneous Connection Costs

Heydari, Babak and Mosleh, Mohsen and Dalili, Kia (2015): Efficient Network Structures with Separable Heterogeneous Connection Costs. Published in: Economic Letters , Vol. 134, (September 2015): pp. 82-85.

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Abstract

We introduce a heterogeneous connection model for network formation to capture the effect of cost heterogeneity on the structure of efficient networks. In the proposed model, connection costs are assumed to be separable, which means the total connection cost for each agent is uniquely proportional to its degree. For these sets of networks, we provide the analytical solution for the efficient network and discuss stability implications. We show that the efficient network exhibits a core-periphery structure, and for a given density, we find a lower bound for clustering coefficient of the efficient network.

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