On the Interaction between Heterogeneity and Decay in Two-way Flow Models

Pascal Billand (1) , Christophe Bravard (1) , Sudipta Sarangi (2)

1 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne
2 Department of Economics, Louisiana State University

In this paper we examine the role played by heterogeneity in the popular “connections model” of Jackson andWolinsky (1996). We prove that under heterogeneity in values or decay involving only two degrees of freedom, all networks can supported as Nash. Moreover, we show that Nash networks may not always exist. In the absence of decay, neither result can be found in a model with value heterogeneity. Finally, we show that on reducing heterogeneity, both the earlier “anything goes” result and the non-existence problem disappear.

Mots clés: connections model; decay; two-way flow models

Domaines: Economies et finances

Pascal Billand, Christophe Bravard, Sudipta Sarangi. On the Interaction between Heterogeneity and Decay in Two-way Flow Models. 2011. ⟨halshs-00574258⟩