Under-connected and over-connected networks: the role of externalities in strategic network formation

Buechel B, Hellmann T (2012)
Review of Economic Design 16(1): 71-87.

Journal Article | Published | English

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Since the seminal contribution of Jackson and Wolinsky (J Econ Theory 71(1): 44-74, 1996) 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. Those results are neither restricted to specific assumptions on the agents' preferences (e. g. homogeneity), nor to a specific notion of stability or efficiency.
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Buechel B, Hellmann T. Under-connected and over-connected networks: the role of externalities in strategic network formation. Review of Economic Design. 2012;16(1):71-87.
Buechel, B., & Hellmann, T. (2012). Under-connected and over-connected networks: the role of externalities in strategic network formation. Review of Economic Design, 16(1), 71-87.
Buechel, B., and Hellmann, T. (2012). Under-connected and over-connected networks: the role of externalities in strategic network formation. Review of Economic Design 16, 71-87.
Buechel, B., & Hellmann, T., 2012. Under-connected and over-connected networks: the role of externalities in strategic network formation. Review of Economic Design, 16(1), p 71-87.
B. Buechel and T. Hellmann, “Under-connected and over-connected networks: the role of externalities in strategic network formation”, Review of Economic Design, vol. 16, 2012, pp. 71-87.
Buechel, B., Hellmann, T.: Under-connected and over-connected networks: the role of externalities in strategic network formation. Review of Economic Design. 16, 71-87 (2012).
Buechel, Berno, and Hellmann, Tim. “Under-connected and over-connected networks: the role of externalities in strategic network formation”. Review of Economic Design 16.1 (2012): 71-87.
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