A Note on Partner Heterogeneity and Strict Nash Networks

Abstract

This note extends the studies on the impacts of partner heterogeneity in two-way flow Strict Nash network of ( Billand et al., 2011 ) by allowing for the existence of small information decay. I show that the incorporation of small information decay does not change the results of this aforementioned paper: every Strict Nash network is a minimally connected Bi or branching network. Since the studies on the roles of partner heterogeneity by this aforementioned paper are limited to the assumption that link formation is unilateral, I also propose another extension that studies the roles of partner heterogeneity in a more general model of network formation proposed by ( Olaizola and Valenciano, 2015 ), which allows link formation to be both unilateral and bilateral. I show that the inclusion of partner heterogeneity breaks away a major result in this aforementioned paper: Nash network no longer consists of at most one nontrivial strongly full subnetwork.