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.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Complex Networks, Connection Model, Efficient networks, Distance-based utility, Core-periphery, Pairwise Stability
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory

References

Bala, V. and Goyal, S. (1997). Self-organization in communication networks. Technical report, Econometric Institute Research Papers.

Bramoullé, Y. (2007). Anti-coordination and social interactions. Games and Economic Behavior, 58(1):30-49.

Carayol, N. and Roux, P. (2009). Knowledge flows and the geography of networks: A strategic model of small world formation. Journal of Economic Behavior & Organization, 71(2):414-427.

Galeotti, A., Goyal, S., and Kamphorst, J. (2006). Network formation with heterogeneous players. Games and Economic Behavior, 54(2):353-372.

Goyal, S. (1993). Sustainable communication networks. Econometric Institute, Erasmus University Rotterdam.

Jackson, M. O. and Rogers, B. W. (2005). The economics of small worlds. Journal of the European Economic Association, 3(2-3):617-627.

Jackson, M. O. and Wolinsky, A. (1996). A strategic model of social and economic networks. Journal of economic theory, 71(1):44-74.

Persitz, D. (2010). Core-periphery r&d collaboration networks. Working paper.

Rombach, M. P., Porter, M. A., Fowler, J. H., and Mucha, P. J. (2014). Core-periphery structure in networks. SIAM Journal on Applied mathematics, 74(1):167-190.

Vandenbossche, J. and Demuynck, T. (2013). Network formation with heterogeneous agents and absolute friction. Computational Economics, 42(1):23-45.

Zhang, X., Martin, T., and Newman, M. (2014). Identification of core-periphery structure in networks. arXiv preprint arXiv:1409.4813.