DP8052 From Assortative to Dissortative Networks: The Role of Capacity Constraints
|Author(s):||Michael König, Claudio J. Tessone, Yves Zenou|
|Publication Date:||October 2010|
|Keyword(s):||Bonacich centrality, nested split graphs, network formation, social interactions|
|JEL(s):||A14, C63, D85|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8052|
We consider a dynamic model of network formation where agents form and sever links based on the centrality of their potential partners. We show that the existence of capacity constrains in the amount of links an agent can maintain introduces a transition from dissortative to assortative networks. This effect can shed light on the distinction between technological and social networks as it gives a simple mechanism explaining how and why this transition occurs.