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Title:Nash Networks with Heterogeneous Agents PDF Logo
Authors:Haller, Hans
Sarangi, Sudipta
Issue Date:2003
Series/Report no.:DIW-Diskussionspapiere 337
Abstract:A non-cooperative model of network formation is developed. Agents form links with others based on the cost of the link and its assessed benefit. Link formation is one-sided, i.e., agents can initiate links with other agents without their consent, provided the agent forming the link makes the appropriate investment. Information flow is two-way. The model builds on the work of Bala and Goyal, but allows for agent heterogeneity. Whereas they permit links to fail with a certain common probability, in our model the probability of failure can be different for different links. We investigate Nash networks that exhibit connectedness and super-connectedness. We provide an explicit characterization of certain star networks. Efficiency and Pareto-optimality issues are discussed through examples. We explore alternative model specifications to address potential shortcomings.
JEL:D83
D82
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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