Efficiency vs. Stability in a Mixed Network Formation Model

Abstract

The purpose of this paper is twofold. First, the incomplete results relative to effciency in a transitional model introduced in a previous paper, distinguishing two types of links, strong or doubly-supported and weak or singly-supported, are completed with a full-characterization. Second, as it turns out, effcient structures are stable only for a small range of values of the parameters within the much wider range where they are effcient. This motivates the study of the impact on stability of allowing players to negotiate bilaterally the shares of the cost of doubly-supported links.