Abstract
I study a one-way flow connections model in which players are heterogeneous with respect to values and the costs of establishing a link. I show that values and costs heterogeneity are equally important in determining the level of connectedness and the architecture of equilibrium networks. I also show that when asymmetries are independent of the potential partner there are distributions of costs and values for which centrality is a distincitive feature of equilibrium networks. This sharply contrasts with the homogeneous case.
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I thank an anonymous referee for useful comments. The paper has benefited from discussion with Gabriella Conti, Jose Luis Moraga-Gonzalez, Fernando Vega-Redondo and Sanjeev Goyal.
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Galeotti, A. One-way flow networks: the role of heterogeneity. Economic Theory 29, 163–179 (2006). https://doi.org/10.1007/s00199-005-0015-0
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DOI: https://doi.org/10.1007/s00199-005-0015-0