Subscription Mechanisms for Network Formation

Suresh Mutuswami and Eyal Winter ()

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: We analyze a model of network formation where the costs of link formation are publicly known but individual benefits are not known to the social planner. The objective is to design a simple mechanism ensuring efficiency, budget balance and equity. We propose two mechanisms towards this end; the first ensures efficiency and budget balance but not equity. The second mechanism corrects the asymmetry in payoffs through a two-stage variant of the first mechanism. We also discuss an extension of the basic model to cover the case of directed graphs and give conditions under which the proposed mechanisms are immune to coalitional deviations.

Pages: 21 pages
Date: 2001-04
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Published in Journal of Economic Theory, 2002, vol. 106, pp.242-264.

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Journal Article: Subscription Mechanisms for Network Formation (2002)
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