Stable networks

A network is a graph where the nodes represent agents and an are exists between two nodes if the corresponding agents interact bilaterally. An exogeneous value function gives the value of each network, while an allocation rule describes how the value is distributed amongst the agents. M. Jackson and A. Wolinsky (1996, J. Econ. Theory 71, 44-74) have recently demonstrated a potential conflict between stability and efficiency in this framework. In this paper, we use an implementation approach to see whether the tension between stability and efficiency can be resolved. (C) 1997 Academic Press.