The Stability of Exchange Networks
AbstractThis paper develops a formal model of exchange network stability that combines expected value theory (Friedkin 1995) with the economic literature on network dynamics. We identify stable networks up to size 8 for varying costs and investigate whether they are Pareto efficient and egalitarian. Only a very small number of networks are stable. Odd cycles and networks consisting of dyads and at most one isolate are the only egalitarian, efficient, and stable networks for a large cost range. We show that some of these results are generalizable to networks of any size and are independent of using expected value theory.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2007.66.
Date of creation: Jun 2007
Date of revision:
Exchange Networks; Stability; Efficiency; Equity; Social Dilemma;
Find related papers by JEL classification:
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-GTH-2007-08-08 (Game Theory)
- NEP-NET-2007-08-08 (Network Economics)
- NEP-SOC-2007-08-08 (Social Norms & Social Capital)
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