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Under-connected and over-connected networks

  • Berno Buechel

    ()

    (Institute of Mathematical Economics, Bielefeld University)

  • Tim Hellmann

    ()

    (Institute of 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 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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Length: 24 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:bie:wpaper:400
Contact details of provider: Postal: Postfach 10 01 31, 33501 Bielefeld
Phone: +49(0)521-106-4907
Web page: http://www.imw.uni-bielefeld.de/

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  1. Paul Belleflamme & Francis Bloch, 2001. "Market Sharing Agreements and Collusive Networks," Working Papers 443, Queen Mary University of London, School of Economics and Finance.
  2. Francis Bloch & Bhaskar Dutta, 2008. "Communication networks with endogeneous link strength," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-15, Indian Statistical Institute, New Delhi, India.
  3. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. repec:rne:rneart:v:3:y:2004:i:1:p:19-41 is not listed on IDEAS
  5. 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.
  6. Subhadip Chakrabarti & Robert P. Gilles, 2005. "Network Potentials," Bonn Econ Discussion Papers bgse28_2005, University of Bonn, Germany.
  7. 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.
  8. Antoni Calvó-Armengol & Rahmi Ilkiliç, 2005. "Pairwise-Stability and Nash Equilibria in Network Formation," Working Papers 2005.34, Fondazione Eni Enrico Mattei.
  9. Bloch, Francis & Jackson, Matthew, 2004. "The Formation of Networks with Transfers among Players," Working Papers 1194, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Berno Buechel, 2007. "Network formation with closeness incentives," Center for Mathematical Economics Working Papers 395, Center for Mathematical Economics, Bielefeld University.
  11. Francis Bloch & Matthew Jackson, 2006. "Definitions of equilibrium in network formation games," International Journal of Game Theory, Springer, vol. 34(3), pages 305-318, October.
  12. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
  13. 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.
  14. Tim Hellmann & Berno Buechel, 2009. "Under-connected and Over-connected Networks," Working Papers 2009.38, Fondazione Eni Enrico Mattei.
  15. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  16. Tim Hellmann, 2009. "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.
  17. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer, vol. 34(3), pages 319-349, 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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