A strategic model of social and economic networks

Matthew O. Jackson*, Asher Wolinsky

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1166 Scopus citations

Abstract

We study the stability and efficiency of social and economic networks, when self-interested individuals can form or sever links. First, for two stylized models, we characterize the stable and efficient networks. There does not always exist a stable network that is efficient. Next, we show that this tension persists generally: to assure that there exists a stable network that is efficient, one is forced to allocate resources to nodes that are not responsible for any of the production. We characterize one such allocation rule: the equal split rule, and another rule that arises naturally from bargaining of the players. Journal Economic Literature Classification Numbers: A14, D20, J00.

Original languageEnglish (US)
Pages (from-to)44-74
Number of pages31
JournalJournal of Economic Theory
Volume71
Issue number1
DOIs
StatePublished - Oct 1996

ASJC Scopus subject areas

  • Economics and Econometrics

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