The Stability and Efficiency of Economic and Social Networks

Abstract

This paper studies the formation of networks among individuals. The focusis on the compatibility of overall societal welfare with individual incentives toform and sever links. The paper reviews and synthesizes some previous resultson the subject, and also provides new results on the existence of pairwise-stablenetworks and the relationship between pairwise stable and e±cient networks ina variety of contexts and under several definitions of e±ciency.