Date of This Version
June 2009
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 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.
Recommended Citation
Hellmann, Tim and Buechel, Berno, "Under-connected and Over-connected Networks" (June 23, 2009). Fondazione Eni Enrico Mattei Working Papers. Paper 299.
https://services.bepress.com/feem/paper299