A Unifying model of strategic network formation

Documento de trabajo

We provide a model that merges two basic models of strategic network formation and incorporates them as extreme cases: Jackson and Wolinsky' s connections model based on bilateral formation of links, and Bala and Goyal' s two-way flow model, where links can be unilaterally formed. In our model a link can be created unilaterally, but when it is only supported by one of the two players the flow through it suffers some friction or decay, but more than when it is supported by both players. When the friction in singly-supported links is maximal (i.e. there is no fl ow) we have Jackson and Wolinsky 's connections model, while when fl ow in singly-supported links is as good as in doubly-supported links we have Bala and Goyal' s two-way flow model. In this setting, a joint generalization of the results relative to efficiency and stability in both seminal papers is achieved, and the robustness in both models is tested with positive results.