Subscription Mechanisms for Network Formation |
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| Authors: | Suresh MutuswamiEyal Winter |
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| Affiliation: | a Department of Economics, University of Essex, Wivenhoe Park, Colchester, CO4 3SQ, United Kingdomf1smutus@essex.ac.ukf1b Department of Economics, European University Institute, Badia Fiesolana, Via dei Roccettini, 9, 50016, San Domenico di Fiesole, (FI), Italyc Center for Rationality and Interactive Decision Theory, Hebrew University of Jerusalem, Feldman Building, Givat Ram, 91904, Jerusalem, Israelf2mseyal@mscc.huji.ac.ilf2 |
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| Abstract: | We analyze a model of network formation where the costs of link formation are publicly known but individual benefits are not known to the social planner. The objective is to design a simple mechanism ensuring efficiency, budget balance, and equity. We propose two mechanisms towards this end; the first ensures efficiency and budget balance but not equity. The second mechanism corrects the asymmetry in payoffs through a two-stage variant of the first mechanism. Journal of Economic Literature Classification Numbers: C71, C72, D20. |
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| Keywords: | networks mechanism design shapley value. |
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