Stable Networks

Abstract

A network is a graph where the nodes represent agents and an arc exists between two nodes if the corresponding agents interact bilaterally. An exogeneous value function gives the value of each network, while an allocation rule describes how the value of any graph is distributed amongst the agents. We explore the possibility of constructing allocation rules which will ensure that efficient networks of agents will form when the individual agents decide to form or severe links amongst themselves.

Additional Information

We are most grateful to Matthew Jackson for several helpful discussions and suggestions. Thanks are also due to Sudipto Bhattacharya for comments on an earlier version of the paper. This version of the paper was written when the first author was visiting Caltech. Their hospitality is gratefully acknowledged. Published as Dutta, B., & Mutuswami, S. (1997). Stable networks. Journal of economic theory, 76(2), 322-344.

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