Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43760
Authors: 
Buechel, Berno
Hellmann, Tim
Year of Publication: 
2008
Series/Report no.: 
Working papers // Institute of Mathematical Economics 400
Abstract: 
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.
Subjects: 
Networks
Network formation
Connections
Game theory
Externalities
Spillovers
Stability
Efficiency
JEL: 
D85
C72
L14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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