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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 URL: http://www.imw.uni-bielefeld.de/papers/files/imw-wp-400.pdf
File Function: First version, 2008
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Paper provided by Bielefeld University, Center for Mathematical Economics in its series 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. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
  2. Berno Buechel & Tim Hellmann, 2008. "Under-connected and over-connected networks," Working Papers 400, Bielefeld University, Center for Mathematical Economics.
  3. Paul Belleflamme & Francis Bloch, 2001. "Market Sharing Agreements and Collusive Networks," Working Papers 443, Queen Mary University of London, School of Economics and Finance.
  4. Berno Buechel, 2007. "Network formation with closeness incentives," Working Papers 395, Bielefeld University, Center for Mathematical Economics.
  5. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
  6. Antoni Calvó-Armengol & Rahmi Ilkiliç, 2005. "Pairwise-Stability and Nash Equilibria in Network Formation," Working Papers 2005.34, Fondazione Eni Enrico Mattei.
  7. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer, vol. 34(3), pages 319-349, October.
  8. repec:rne:rneart:v:3:y:2004:i:1:p:19-41 is not listed on IDEAS
  9. Sanjeev Goyal & Sumit Joshi, 2006. "Bilateralism And Free Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 749-778, 08.
  10. Jackson, Matthew O. & van den Nouweland, Anne, 2005. "Strongly stable networks," Games and Economic Behavior, Elsevier, vol. 51(2), pages 420-444, May.
  11. Subhadip Chakrabarti & Robert P. Gilles, 2005. "Network Potentials," Bonn Econ Discussion Papers bgse28_2005, University of Bonn, Germany.
  12. Matthew O. Jackson & Francis Bloch, 2004. "The Formation of Networks with Transfers among Players," Working Papers 2004.80, Fondazione Eni Enrico Mattei.
  13. 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.
  14. 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.
  15. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  16. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  17. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
  18. Tim Hellmann, 2009. "Convexity and Complementarity in Network Formation: Implications for the Structure of Pairwise Stable Networks," Working Papers 423, Bielefeld University, Center for Mathematical Economics.
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