On the Tension Between Stability and Efficiency in Two-Way Flow Network with Small Decay
The tension between stability and efficiency in network formation models refers to a common finding in the literature of social networks: equilibrium networks and efficient networks often exhibit substantially different characteristics. In this note, I show that this tension can be partially reconci...
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| Main Author: | |
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| Format: | Article |
| Language: | English |
| Published: |
Dunarea de Jos University of Galati
2025-04-01
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| Series: | Annals of Dunarea de Jos University. Fascicle I : Economics and Applied Informatics |
| Subjects: | |
| Online Access: | http://eia.feaa.ugal.ro/images/eia/2025_1/Banchongsan_Charoensook.pdf |
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| Summary: | The tension between stability and efficiency in network formation models refers to a common finding in the literature of social networks: equilibrium networks and efficient networks often exhibit substantially different characteristics. In this note, I show that this tension can be partially reconciled in the two-way flow model of network formation with partner heterogeneity by introducing a small degree of information decay. This result extends a similar finding established for homogeneous agents in Charoensook (2025). Thus, this note contributes to the literature by demonstrating that the reconciliation of stability and efficiency through a small decay assumption is not confined to models with agent homogeneity but also holds in more general network settings. |
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| ISSN: | 1584-0409 |