Efficient Network Structures with Separable Heterogeneous Connection Costs
For researchers in network economics and social network analysis, this provides a theoretical framework for understanding efficient network structures under cost heterogeneity.
The paper models network formation with heterogeneous connection costs and analytically derives the efficient network structure, showing it has a core-periphery pattern and providing a lower bound for the clustering coefficient given network density.
We introduce a heterogeneous connection model for network formation to capture the effect of cost heterogeneity on the structure of efficient networks. In the proposed model, connection costs are assumed to be separable, which means the total connection cost for each agent is uniquely proportional to its degree. For these sets of networks, we provide the analytical solution for the efficient network and discuss stability impli- cations. We show that the efficient network exhibits a core-periphery structure, and for a given density, we find a lower bound for clustering coefficient of the efficient network.