original papers: The stability and efficiency of directed communication networks

Matthew Jackson and Bhaskar Dutta

Review of Economic Design, 2000, vol. 5, issue 3, 272 pages

Abstract: This paper analyzes the formation of directed networks where self-interested individuals choose with whom they communicate. The focus of the paper is on whether the incentives of individuals to add or sever links will lead them to form networks that are efficient from a societal viewpoint. It is shown that for some contexts, to reconcile efficiency with individual incentives, benefits must either be redistributed in ways depending on "outsiders" who do not contribute to the productive value of the network, or in ways that violate equity (i.e., anonymity). It is also shown that there are interesting contexts for which it is possible to ensure that efficient networks are individually stable via (re)distributions that are balanced across components of the network, anonymous, and independent of the connections of non-contributing outsiders.

Keywords: Networks; stability; efficiency; incentives (search for similar items in EconPapers)
JEL-codes: A14 D20 J00 (search for similar items in EconPapers)
Date: 2000-09-11
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Citations: View citations in EconPapers (22)

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