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On the Tension Between Stability and Efficiency in Two-Way Flow Network with Small Decay

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  • Banchongsan Charoensook

    (Keimyung University, Daegu, South Korea)

Abstract

The tension between stability and efficiency in network formation models refers to a common finding in the literature of social networks: equilibrium networks and efficient networks often exhibit substantially different characteristics. In this note, I show that this tension can be partially reconciled in the two-way flow model of network formation with partner heterogeneity by introducing a small degree of information decay. This result extends a similar finding established for homogeneous agents in Charoensook (2025). Thus, this note contributes to the literature by demonstrating that the reconciliation of stability and efficiency through a small decay assumption is not confined to models with agent homogeneity but also holds in more general network settings.

Suggested Citation

  • Banchongsan Charoensook, 2025. "On the Tension Between Stability and Efficiency in Two-Way Flow Network with Small Decay," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 162-169.
    • Handle: RePEc:ddj:fseeai:y:2025:i:1:p:162-169
    DOI: https://doi.org/10.35219/eai15840409496
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