This paper characterizes the set of equilibrium networks in the two-way flow model of network formation with small decay, and this for all increasing benefit functions of the players. We show that as long as the population is large enough, this set contains large- as well as small-diameter networks. For all benefit functions, the periphery-sponsored star is the most stable. When the marginal benefits of information are constant, all non-star networks are equally stable. With increasing marginal benefits of information, small-diameter networks in general tend to be more stable. However, with decreasing marginal benefits of information, large-diameter networks tend to be the most robust along with the periphery-sponsored star

decay, network formation, non-linear benefits, two-way flow model
Noncooperative Games (jel C72), Network Formation (jel D85)
Tinbergen Institute
hdl.handle.net/1765/21865
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
Tinbergen Institute

de Jaegher, K, & Kamphorst, J.J.A. (2010). Two-way Flow Networks with Small Decay. Discussion paper / Tinbergen Institute. Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/21865