Subscription Mechanisms for Network Formation
AbstractWe 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.
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Bibliographic InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp264.
Length: 21 pages
Date of creation: Apr 2001
Date of revision:
Publication status: Published in Journal of Economic Theory, 2002, vol. 106, pp.242-264.
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