On Efficiency and Stability in Two-way Flow Network with Small Decay: A Note

Banchongsan Charoensook

No 2022.12, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Most literature in strategic network formation shows that there is a substantial tension between stability and efficiency. In this note, I show that such is not the case in the twoway flow model with small decay studied by Bala and Goyal (2000a) and De Jaegher and Kamphorst (2015). Specifically, I show that every link receiver in a Nash network serves as an efficient trans-mitter of information. I also generalize this result to the case of player hetero-geneity and then provide a fine-detail characterization of effiicient networks.

Keywords: Network Formation; Nash Network; Two-way Flow Network; Agent Heterogeneity; Efficient Network (search for similar items in EconPapers)
JEL-codes: C72 D85 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-gth and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2022.12

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