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Under-connected and over-connected networks

  • Buechel, Berno

    (Center for Mathematical Economics, Bielefeld University)

  • Hellmann, Tim

    (Center for Mathematical Economics, Bielefeld University)

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 gap by analyzing the role of positive and negative externalities of link formation. We find 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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File URL: https://pub.uni-bielefeld.de/download/2315804/2319842
File Function: First Version, 2008
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Paper provided by Center for Mathematical Economics, Bielefeld University in its series Center for Mathematical Economics Working Papers with number 400.

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Date of creation: 15 Aug 2011
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Handle: RePEc:bie:wpaper:400
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  1. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
  2. Bloch, Francis & Jackson, Matthew O., 2007. "The formation of networks with transfers among players," Journal of Economic Theory, Elsevier, vol. 133(1), pages 83-110, March.
  3. Goyal, S. & Joshi, S., 1999. "Bilateralism and free trade," Econometric Institute Research Papers EI 9953-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  4. 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.
  5. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 319-349, October.
  6. Hellmann, Tim, 2011. "Convexity and complementarity in network formation. Implications for the structure of pairwise stable networks," Center for Mathematical Economics Working Papers 423, Center for Mathematical Economics, Bielefeld University.
  7. Buechel, Berno & Hellmann, Tim, 2011. "Under-connected and over-connected networks," Center for Mathematical Economics Working Papers 400, Center for Mathematical Economics, Bielefeld University.
  8. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  9. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
  10. Subhadip Chakrabarti & Robert Gilles, 2007. "Network potentials," Review of Economic Design, Springer;Society for Economic Design, vol. 11(1), pages 13-52, June.
  11. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
  12. repec:bpj:rneart:v:3:y:2004:i:1:p:19-41 is not listed on IDEAS
  13. Antoni Calvó-Armengol & Rahmi İlkılıç, 2009. "Pairwise-stability and Nash equilibria in network formation," International Journal of Game Theory, Springer;Game Theory Society, vol. 38(1), pages 51-79, March.
  14. Buechel, Berno, 2011. "Network formation with closeness incentives," Center for Mathematical Economics Working Papers 395, Center for Mathematical Economics, Bielefeld University.
  15. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 305-318, October.
  18. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
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