Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286520 
Year of Publication: 
2020
Citation: 
[Journal:] SERIEs - Journal of the Spanish Economic Association [ISSN:] 1869-4195 [Volume:] 11 [Issue:] 3 [Year:] 2020 [Pages:] 341-367
Publisher: 
Springer, Heidelberg
Abstract: 
We consider a natural generalization of Jackson and Wolinsky's (J Econ Theory 71:44- 74, 1996) connections model where the quality or strength of a link depends on the amount invested in it and is determined by a non-decreasing function of that amount. The information that the nodes receive through the network is the revenue from investments in links. We prove that in this most general version of the connections model, the only possibly non-empty efficient networks, in the sense of maximizing the aggregate profit, are still the all-encompassing star and the complete network, with the sole and rare exception of a highly particular case where there is a draw between the allencompassing star, the complete network and a whole range of a particular type of nested split graph structures intermediate between them.
Subjects: 
Network formation
Connections model
Nested split graph
Efficiency
JEL: 
A14
C7
D85
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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