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On Efficiency and Stability in Two-way Flow Network with Small Decay: A Note

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  • Charoensook, Banchongsan

Abstract

Most literature in strategic network formation shows that there is a substantial tension between stability and efficiency. In this note, I show that such is not the case in the two way flow model with small decay studied by Bala and Goyal (2000a) and De Jaegher and Kamphorst (2015). Specifically, I show that every link receiver in a Nash network serves as an efficient trans-mitter of information. I also generalize this result to the case of player hetero-geneity and then provide a fine-detail characterization of effiicient networks.

Suggested Citation

  • Charoensook, Banchongsan, 2022. "On Efficiency and Stability in Two-way Flow Network with Small Decay: A Note," FEEM Working Papers 324041, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemwp:324041
    DOI: 10.22004/ag.econ.324041
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    Industrial Organization; Research Methods/ Statistical Methods;

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