Under-connected and over-connected networks

Berno Buechel and Tim Hellmann
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Berno Buechel: Center for Mathematical Economics, Bielefeld University

No 400, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: Since the seminal contribution of Jackson & Wolinsky 1996 [A Strategic Model of Social and Economic Networks, JET 71, 44-74] it has been widely acknowledged that the formation of social networks exhibits a general conflict between individual strategic behavior and collective outcome. What has not been studied systematically are the sources of inefficiency. We approach this gap by analyzing the role of positive and negative externalities of link formation. We find general results that relate situations of positive externalities with stable networks that cannot be "too dense" in a well-defined sense, while situations with negative externalities, tend to induce "too dense" networks.

Keywords: Efficiency; Externalities; Spillovers; Game theory; Connections; Stability; Network formation; Networks (search for similar items in EconPapers)
Date: 2011-08-15
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Citations: View citations in EconPapers (2)

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https://pub.uni-bielefeld.de/download/2315804/2319842 First Version, 2008 (application/pdf)

Related works:
Journal Article: Under-connected and over-connected networks: the role of externalities in strategic network formation (2012)
Working Paper: Under-connected and Over-connected Networks (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:400

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