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Efficiency vs. Stability in a Mixed Network Formation Model

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  • Olaizola Ortega, María Norma
  • Valenciano Llovera, Federico

Abstract

The purpose of this paper is twofold. First, the incomplete results relative to effciency in a transitional model introduced in a previous paper, distinguishing two types of links, strong or doubly-supported and weak or singly-supported, are completed with a full-characterization. Second, as it turns out, effcient structures are stable only for a small range of values of the parameters within the much wider range where they are effcient. This motivates the study of the impact on stability of allowing players to negotiate bilaterally the shares of the cost of doubly-supported links.

Suggested Citation

  • Olaizola Ortega, María Norma & Valenciano Llovera, Federico, 2015. "Efficiency vs. Stability in a Mixed Network Formation Model," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    • Handle: RePEc:ehu:ikerla:15005
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    References listed on IDEAS

    as
    1. Olaizola, Norma & Valenciano, Federico, 2015. "Unilateral vs. bilateral link-formation: A transition without decay," Mathematical Social Sciences, Elsevier, vol. 74(C), pages 13-28.
    2. Norma Olaizola & Federico Valenciano, 2018. "A unifying model of strategic network formation," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(4), pages 1033-1063, November.
    3. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521857406.
    4. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks," Introductory Chapters, in: Connections: An Introduction to the Economics of Networks, Princeton University Press.
    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. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    7. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
    8. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521674096.
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    Keywords

    network formation; unilateral link-formation; bilateral link-formation; stability; efficiency; cost share;
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