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original papers : The stability and efficiency of directed communication networks

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Author Info

  • Matthew O. Jackson
  • Bhaskar Dutta

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.

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Bibliographic Info

Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 5 (2000)
Issue (Month): 3 ()
Pages: 251-272

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Handle: RePEc:spr:reecde:v:5:y:2000:i:3:p:251-272

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Related research

Keywords: Networks; stability; efficiency; incentives;

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Cited by:
  1. Jackson, Matthew O. & Watts, Alison, 2002. "The Evolution of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 106(2), pages 265-295, October.
  2. Matthew O. Jackson & Anne van den Nouweland, 2002. "Strongly Stable Networks," Microeconomics 0211006, EconWPA.
  3. McBride, Michael, 2006. "Imperfect monitoring in communication networks," Journal of Economic Theory, Elsevier, vol. 126(1), pages 97-119, January.
  4. Galeotti, Andrea & Goyal, Sanjeev & Kamphorst, Jurjen, 2006. "Network formation with heterogeneous players," Games and Economic Behavior, Elsevier, vol. 54(2), pages 353-372, February.
  5. Georgios Chasparis & Jeff Shamma, 2012. "Distributed Dynamic Reinforcement of Efficient Outcomes in Multiagent Coordination and Network Formation," Dynamic Games and Applications, Springer, vol. 2(1), pages 18-50, March.
  6. Slikker, Marco & Gilles, Robert P. & Norde, Henk & Tijs, Stef, 2005. "Directed networks, allocation properties and hierarchy formation," Mathematical Social Sciences, Elsevier, vol. 49(1), pages 55-80, January.
  7. Thayer Morrill, 2011. "Network formation under negative degree-based externalities," International Journal of Game Theory, Springer, vol. 40(2), pages 367-385, May.

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