Efficiency vs. Stability in a Mixed Network Formation Model

María Norma Olaizola Ortega and Federico Valenciano

IKERLANAK from Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I

Abstract: The purpose of this paper is twofold. First, the incomplete results relative to effciency in a transitional model introduced in a previous paper, distinguishing two types of links, strong or doubly-supported and weak or singly-supported, are completed with a full-characterization. Second, as it turns out, effcient structures are stable only for a small range of values of the parameters within the much wider range where they are effcient. This motivates the study of the impact on stability of allowing players to negotiate bilaterally the shares of the cost of doubly-supported links.

Keywords: network formation; unilateral link-formation; bilateral link-formation; stability; efficiency; cost share (search for similar items in EconPapers)
Date: 2015-03-26
New Economics Papers: this item is included in nep-ban, nep-gth and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:ehu:ikerla:15005

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