Unilateral vs. bilateral link-formation: A transition without decay

We provide a model that bridges the gap between the simplest variation of two benchmark models of strategic network formation: Bala and Goyal’s two-way flow model without decay, where links can be unilaterally formed, and a variation of Jackson and Wolinsky’s model based on bilateral formation of links assuming no decay. In the model introduced and studied here a link can be created unilaterally. When it is only supported by one of the two players the flow through the link suffers some degree of decay, but when it is supported by both the flow runs without friction. When the decay in links supported by only one player is maximal (i.e. there is no flow) we have a simple variation of Jackson and Wolinsky’s connections model assuming no decay, while when flow in those links is perfect we have Bala and Goyal’s two-way flow model without decay. We study Nash, strict Nash and pairwise Nash stability for the intermediate models. Efficiency and dynamics are also examined.