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 omission by analyzing the role of positive and negative externalities of link formation. This yields 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.
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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number
2009.38.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Paul Belleflamme & Francis Bloch, 2004.
"Market sharing agreements and collusive networks,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 387-411, 05.
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Jackson, Matthew O. & van den Nouweland, Anne, 2002.
"Strongly Stable Networks,"
Working Papers
1147, California Institute of Technology, Division of the Humanities and Social Sciences.
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