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Under-connected and Over-connected Networks

  • Tim Hellmann

    (Bielefeld University)

  • Berno Buechel

    (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 omission by analyzing the role of positive and negative externalities of link formation. This yields 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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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.38.

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Date of creation: May 2009
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Handle: RePEc:fem:femwpa:2009.38
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  1. Matthew O. Jackson, 2001. "Strongly Stable Networks," University of Oregon Economics Department Working Papers 2001-3, University of Oregon Economics Department, revised 15 Nov 2002.
  2. 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.
  3. 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.
  4. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  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. Tim Hellmann & Berno Buechel, 2009. "Under-connected and Over-connected Networks," Working Papers 2009.38, Fondazione Eni Enrico Mattei.
  7. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
  8. Subhadip Chakrabarti & Robert P. Gilles, 2005. "Network Potentials," Bonn Econ Discussion Papers bgse28_2005, University of Bonn, Germany.
  9. Matthew O. Jackson & Francis Bloch, 2004. "The Formation of Networks with Transfers among Players," Working Papers 2004.80, Fondazione Eni Enrico Mattei.
  10. Paul Belleflamme & Francis Bloch, 2001. "Market Sharing Agreements and Collusive Networks," Working Papers 443, Queen Mary University of London, School of Economics and Finance.
  11. 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.
  12. repec:bpj:rneart:v:3:y:2004:i:1:p:19-41 is not listed on IDEAS
  13. Bloch, Francis & Dutta, Bhaskar, 2009. "Communication networks with endogenous link strength," Games and Economic Behavior, Elsevier, vol. 66(1), pages 39-56, May.
  14. Buechel, Berno, 2011. "Network formation with closeness incentives," Center for Mathematical Economics Working Papers 395, Center for Mathematical Economics, Bielefeld University.
  15. 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.
  16. Antoni Calvó-Armengol & Rahmi Ilkiliç, 2005. "Pairwise-Stability and Nash Equilibria in Network Formation," Working Papers 2005.34, Fondazione Eni Enrico Mattei.
  17. Sanjeev Goyal & Sumit Joshi, 2006. "Unequal connections," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(3), pages 319-349, October.
  18. Kosfeld Michael, 2004. "Economic Networks in the Laboratory: A Survey," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-23, March.
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