FEEM working papers "Note di lavoro" series
2007 .066

The Stability of Exchange Networks


Authors: Gönül Doðan, M. A.L.M. van Assen, Arnout van de Rijt, Vincent Buskens
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Exchange Networks,Stability,Efficiency,Equity,Social Dilemma
JEL n.: D85
JEL: Social Networks
Pages: Vol. 31, No. 2, pp. 118-125
Date: 05/2009

Abstract

This paper develops a formal model of exchange network stability that combines expected value theory (Friedkin 1995) with the economic literature on network dynamics. We identify stable networks up to size 8 for varying costs and investigate whether they are Pareto efficient and egalitarian. Only a very small number of networks are stable. Odd cycles and networks consisting of dyads and at most one isolate are the only egalitarian, efficient, and stable networks for a large cost range. We show that some of these results are generalizable to networks of any size and are independent of using expected value theory.

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