On the Interaction between Heterogeneity and Decay in Two-Way Flow Models
GATE Working Paper No. 1109
20 Pages Posted: 9 Mar 2011
Date Written: March 1, 2011
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.
Keywords: connections model, decay, two-way ﬂow models
JEL Classification: C72, D85
Suggested Citation: Suggested Citation